Employee Ownership Blog
Corey Rosen

Corey Rosen

September 22, 2021

Defense Authorization Act Provision Makes 100% ESOPs Eligible for Small Business Set-Asides

A potentially major improvement in rules for ESOP defense contractors was included in the Senate Armed Services Committee’s markup of the 2022 National Defense Authorization Act (NDAA, S 2042). An amendment from Sen. Jean Shaheen (D-NH) would provide that the Department of Defense should create a pilot program that would allow companies that are or become 100% ESOP-owned to receive noncompete follow-on contracts for the work, even if they no longer meet applicable small business or other set-aside requirements. The award would be contingent on a finding that the contractor’s performance was satisfactory or better. The program would run for three years, and the Government Accountability Office would be required to provide an assessment of it with two years of the program’s sunset.

Corey Rosen

September 20, 2021

Court Rules Decisively Against DOL in ESOP Valuation Case

In Walsh v. Bowers, No. 1:18-cv-00155-SOM-WRP (D.C. Hawaii, September 17, 2021), a district court decisively ruled in favor of the trustee and the board of directors of the ESOP company Bowers+Kubota in an ESOP valuation case. The judge ruled that the DOL’s valuation "rests on errors" because its expert failed to follow standard valuation practices, used inaccurate and incomplete information about the company’s finances, and improperly compared the price the ESOP paid to a very preliminary lower offer from another company. The court noted that the preliminary offer was likely just a negotiating tool, analogizing that “an individual who makes an offer of $15,000 for a used luxury car with a Blue Book value of $40,000 does not, by virtue of making a ‘lowball’ offer that is never accepted, tend to establish that the car is worth only $15,000.”

Corey Rosen

September 15, 2021

Budget Committee Markup of Build Back Better Bill Includes $500 Million for Employee Ownership

Updated September 27

Corey Rosen

August 25, 2021

Australian Legislative Committee Urges Consideration of Employee Ownership Trusts

Employee ownership in Australia is limited primarily to employee stock purchase plans and employee equity grant programs such as stock options, although some advisors have figured out ways to create something that looks somewhat like a U.S. ESOP. A new report from the House of Representatives Standing Committee on Tax and Revenue titled Owning a Share of Your Work: Tax Treatment of Employee Share Schemes discusses the state of stock plans in the country.

Corey Rosen

August 20, 2021

Conservative Party in Canada Endorses Employee Ownership Incentives

In its new election platform, the Conservative Party in Canada joins the ruling Liberal Party in pushing for major changes in Canadian law to create an employee ownership structure similar to ESOPs in the U.S. and employee ownership trusts in the UK. The Liberals had already included proposals to promote employee ownership in their proposed budget. The Conservatives endorsed providing capital gain deferrals for owners selling to employee ownership trusts as well as government support to help finance the sales.

Corey Rosen

August 13, 2021

Employee-Owned Companies Dominate B Lab Best for the World Awards

Fifteen of the 19 winners in the medium- and large-company categories of B Lab’s Best For the World awards for workers are employee-owned (and almost all are NCEO members). B Lab provides certification for companies complying with its standards for meeting various social and environmental goals. The companies are Atomic Object, Butler/Till, Cooperative Home Case Associates, KeHE, King Arthur Baking, New Age Industries, Chroma Technology, Future State, Gardener's Supply, Global Prairie, Hallam-ICS, Ingage Partners, Namaste Solar, Revision Energy, and Tier1 Partners.

Corey Rosen

August 05, 2021

WSJ Article Points to Need for More Employee Ownership for Workers of Color

An excellent article in the Wall Street Journal on August 5, For Black and Latino Workers, Equity Rewards Are Elusive, discussed how research consistently shows that people of color are much less likely to accumulate equity in their companies than other workers. Quoting General Social Survey data, the article noted that Black and Latino workers who report having stock in their companies have about half of what white workers do. A 2020 survey from Carta, a stock plan administration company, found that in startups, Black employees account for just 2% of all the equity grants.

Corey Rosen

June 25, 2021

New Colorado Law Provides Tax Credits to Help Fund Converting to Employee Ownership

Colorado has become the first state to pass a law that helps cover some of the costs to convert to employee ownership. On June 23, Governor Polis signed into law H.B. 21-1311, a bill that makes sweeping changes to Colorado tax law, notably a provision to provide $10 million annually in tax credits over the next six years to fund the professional service costs of conversions to employee ownership. The funds could be used to convert to an ESOP, an employee ownership trust, or a worker cooperative. ESOPs can qualify for a credit equal to 50% of the conversion costs up to $50,000; cooperative and employee ownership trusts can get up to $25,000 (see page 21 of the bill).

Corey Rosen

May 25, 2021

Tax Deferral for Sellers to S Corp ESOPs Included in Bipartisan Bill

On May 5, 2021, the House Ways and Means Committee unanimously passed the Securing a Strong Retirement Act of 2021, referred to as "SECURE Act 2.0" (H.R. 2954) in reference to the SECURE Act of 2019. The bill makes a number of changes to retirement plan law but, unlike the version introduced last year, does not include a provision allowing owners of S corporation ESOPs to get the same Section 1042 tax deferral on the sale of stock to an ESOP trust as owners of C corporation ESOPs can. S. 1770, sponsored by Senators Cardin (D-MD) and Portman (R-OH), does.

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