Maryland Introduces Employee Ownership Legislation

A bipartisan bill in the Maryland Senate (SB 498) was introduced January 28 to eliminate capital gains taxes on the sale of a business to an ESOP, a qualifying employee benefit trust, or a direct share purchase plan. If the plan is not an ESOP, the shares must meet the same requirements as ESOP shares do (having the highest combination of voting and dividend rights). Shares must be allocated based on relative pay, seniority, or hours worked. Eligibility rules would be the same as for ESOPs. If not sold to an ESOP, the capital gains tax exclusion is limited to the amount transferred to an eligible employee times the number of employees. In direct share plans, no one can own more than 10 times the lowest amount any other eligible employee receives.