Employee Ownership Blog
Corey Rosen

Corey Rosen

DOL Delays ESOP Valuation Regulations to March 2024

The Department of Labor (DOL) announced that it now expects to release its proposed regulations on ESOP valuation in March 2024. The DOL previously stated that it expected to issue the proposed regulations by the end of 2023. The WORK Act, part of the SECURE 2.0 Act of 2022, requires the DOL to issue valuation regulations for ESOPs. The announcement does not specify a date in March, and it is not binding -- the proposed rules could be released before or after March.

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Corey Rosen

Canadian Government Proposes Significant Tax Incentives for Employee Ownership Trusts

In its 2023 Fall Economic Statement released on November 21, the Canadian government (the ruling party in Parliament)  “introduce[d] a series of new measures to advance the government's economic plan by continuing to build a stronger economy, and provide[d] important updates on key pillars of the government's plan to fight climate change and create great careers for Canadians from coast to coast to coast.” The new measures include a tax exclusion on up to the first $10 million in capital gains from the sale of a business to a qualifying employee ownership trust (EOT) (p. 62 of the PDF version of the Fall Economic Statement). A similar law in the UK has spurred rapid development of EOTs, which are growing at a rate three times that of ESOPs in the U.S., even though the UK is much smaller.

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Corey Rosen

Missouri Makes 50% Capital Gains Exclusion on ESOP Sales Permanent

On September 6, Missouri Governor Mike Parsons signed S.B. 20 (also see the PDF of the bill text), one of whose provisions makes permanent a law enacted in 2016 that provides a 50% reduction in state capital gains taxes for business owners selling to an ESOP as long as the ESOP owns at least 30% of the company after the sale. The law was originally set to sunset in 2023, but this new law removes the sunset provision, making it permanent. Iowa passed a very similar law in 2012

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Corey Rosen

DOL Commits to Proposed ESOP Valuation Regulations by End of 2023

ESOP advocates have long urged the Department of Labor (DOL) to establish clear guidelines for adequate consideration requirements in ESOP transactions. The WORK Act (part of the SECURE 2.0 Act of 2022) requires the DOL to set guidelines for ESOP valuation. Simultaneously, the DOL has been facing a formal petition under the Administrative Procedures Act (APA) brought by the ESOP Association calling for the same formal rulemaking. The DOL denied the petition under the APA but nonetheless agreed to a formal public notice and comment rulemaking with a process that includes publishing their draft regulation through public notice and the opportunity for stakeholder comments. The agency must then respond to those comments before issuing any final regulation.

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Corey Rosen

Small Step Forward on Employee Ownership Provisions in WORK Act

The WORK Act seemed to be a major win for employee ownership advocates. The law directed the Department of Labor (DOL) to create an Employee Ownership Initiative office to provide education on employee ownership (which it has now done) and authorized $50 million in funding over five years, starting in fiscal year (FY) 2025, for state employee ownership outreach and education programs. Although the WORK Act authorized the expenditures for the state programs, funding comes through a separate appropriation process. On July 27, the Senate Appropriations Committee passed a $13.5 billion FY 2024 DOL appropriation bill that says nothing about employee ownership in the bill itself, although the accompanying report directs the DOL to create the Employee Ownership Initiative and to issue guidelines on ESOP valuation (something the DOL has also already committed to do). The $9.8 billion House FY 2024 DOL appropriation bill also has no provisions on employee ownership; unlike the Senate report, the House committee's bill summary does not mention employee ownership. Because the DOL has already committed to the programs described in the Senate bill, it is unclear whether what the House did matters.

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Corey Rosen

Act to Promote Private Employee Ownership Introduced in Both Houses

The Promotion and Expansion of Private Employee Ownership Act (PDF) has been introduced in the House and the Senate. The bill is a revision of a proposal submitted in each chamber to encourage the growth of S corporation ESOPs. Both bills have bipartisan support. The Senate bill’s lead sponsors are Ben Cardin (D-MD) and Steve Daines (R-MT); in the House, the lead sponsors are Mike Kelly (R-PA) and Earl Blumenauer (D-OR). There are 20 Senate cosponsors and 6 House cosponsors so far, including some of the most liberal and conservative members.

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Corey Rosen

Policy Proposal by Leading Republican Thinkers Endorses ESOPs

Mandate for Leadership: The Conservative Promise, a project of the 2025 Presidential Transition Project, has strongly endorsed regulatory changes to make it easier to set up ESOPs. The project, led by the Heritage Foundation, invited over 400 conservative scholars and thinkers to set out detailed policy recommendations for all aspects of the federal government, resulting in an 883-page document.

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