Recognizing the Importance of Employee Ownership, More States Move Forward with Pro-ESOP Initiatives
Taking cues from Colorado, Missouri, Pennsylvania, Iowa, New Jersey, and Virginia, all of which have recently enacted legislation supporting and encouraging the establishment of ESOPs, the states of Texas, Indiana, and Nebraska are now moving forward with their own pro-ESOP initiatives.
Nebraska Law Allows ESOPs to Own CPA Firms
Nebraska Legislative Bill 49 authorizes the ownership of CPA firms by ESOPs, with an ESOP allowed to own up to 49% of a firm. The bill unanimously passed final reading on February 28, and was signed into law on March 6. Most states already allow minority ESOP ownership of CPA firms. Creating more ESOPs in accounting firms is an important step toward making these critical financial advisors of business owners more aware of the important tax advantages and other byproducts (such as increased employee morale and increased employee productivity) that ESOPs create.
Texas Bills Would Provide ESOP Contracting Preference
Bills in the Texas legislature would provide the most comprehensive state effort yet on employee ownership. HB 1198/SB 1650 would
create an Employee Ownership Assistance Office;
create contracting preferences at the state and local government levels;
expand the definition of Certified Historically Underutilized Businesses (primarily women- and minority-owned companies) to allow transition to an ESOP structure without forfeiting HUB status (expansion of a previously introduced bill); and
allow ESOPs to own all or part of a professional corporation (many states prohibit professional corporations from being owned by nonlicensed professionals in the field).
Indiana Resolution to Encourage and Spur Employee Ownership
Indiana Resolution 35 would direct the legislative council in the Indiana Senate to assign a study committee to develop legislation for a capital gains tax exclusion for sales to ESOPs, and to assess the feasibility of the state promoting employee ownership as a business transition tool.
As we see increasing awareness of the benefits of employee ownership, we anticipate even more pro-ESOP initiatives being introduced across the country.
Attributed to Morgan Lewis.