Wisconsin Bill Would Provide Tax Incentives for Employee Ownership Feasibility and Conversion

Wisconsin Assembly Bill 1217 would have provided that the “Wisconsin Economic Development Corporation may certify a business to claim a nonrefundable income tax credit for an amount equal to 70 percent of costs related to converting the business to a worker-owned cooperative or 50 percent of the costs related to converting the business to an employee ownership trust or an employee stock ownership plan. The credit is limited to a maximum amount of $100,000.” The bill would also have provided a state capital gains tax exemption for sales to ESOPs, worker cooperatives, or employee ownership trusts.

The bill's section 238.309 ("Employee ownership conversion costs tax credit") defined an employee ownership trust as "an indirect form of employee ownership in which a trust holds a controlling stake in a qualified business and benefits all employees on an equal basis." Under some interpretations of "equal basis," many existing EOTs would not meet this condition.

The bill was introduced in the Assembly by six Democrats in early April but was too late in the session to move forward.  If passed, Wisconsin would have joined Colorado and Washington in providing tax credits for the costs of setting up an employee-owned company. It would also have been the first state bill to completely exempt sales to employee ownership plans from taxes, and the first to include employee ownership trusts as eligible plans.