SB 5096 — Concerning employee ownership.

S-0823.2S-0200.3 SUBSTITUTE SENATE BILL 5096 State of Washington 68th Legislature 2023 Regular Session By Senate Business, Financial Services, Gaming & Trade (originally sponsored by Senators Padden, Pedersen, Hasegawa, and Schoesler)Schoesler READPrefiled FIRST12/23/22. TIME 01/25/23.

Read first time 01/09/23.

Referred to Committee on Business, Financial Services, Gaming & Trade.

1 SSBSB 5096 has operated since 2019 to create a network of technical support and service providers considering employee ownership structures.

2 SSBSB 5096 associations, financial institutions, unions, small business development centers, economic and workforce development organizations, and nonprofit entities to promote employee ownership benefits and succession models;

and (vii) CreateSubject anto inventorythe successful award of employee-ownedfederal businessesfunding infor thethis statepurpose, includingestablish employeea stockrevolving ownershiploan plans,program workerto cooperatives,assist andexisting employeesmall ownershipbusinesses trusts;to finance a transition to employee ownership.

and (viii) Subject to the successful award of federal funding for this purpose, establish a revolving loan program to assist existing small businesses to finance a transition to employee ownership.

(d) In order to support the revolving loan program, the director or the director's designee must apply for federal funding opportunities that:

3 SSBSB 5096 (d)(i) InSupport ordercapitalization toof supportstate the revolving loan program,programs; the director or the director's designee must apply for federal funding opportunities that:

(i) Support capitalization of state revolving loan programs;

(e) Amounts from the repayment of loans offered by the revolving loan program must be deposited in the employee ownership revolving loan program account established in section 67 of this act.

(4) By December 1st each year, the department must submit a report to the appropriate committees of the legislature on program activitiesactivities, and the number of employee-owned businesses and employee- owned trusts in the state, including recommendations for improvement and barriers for businesses considering employee ownership structures in Washington state.

(a) "Employee-owned business" means:means an employee cooperative established under chapter 23.78 RCW and an entity owned in whole or in part by employee stock ownership plans as defined in 26 U.S.C.

(i) An employee cooperative established under chapter 23.78, 23.86, 23.100, or 24.06 RCW that has at least 50 percent of its board of directors consisting of, and elected by, its employees;

or (ii) An entity owned in whole or in part by employee stock ownership plans as defined in 26 U.S.C.

p.(7) The director shall adopt rules as necessary to implement this section.

4 SSB 5096 (7) The director shall adopt rules as necessary to implement this section.

(1)p. The Washington employee ownership commission is hereby created to exercise the powers in developing and supervising the program created in section 2 of this act.

4 SB 5096 (1) The Washington employee ownership commission is hereby created to exercise the powers in developing and supervising the program created in section 2 of this act.

(D) One economic development expert, from the private sector,sector. with employee ownership knowledge and experience.

The chair shall serve a one-year term p.but may serve more than one term if selected to do so by members of the commission.

5 SSB 5096 but may serve more than one term if selected to do so by members of the commission.

Rules and guidelines for the administration of the program must be included in thep. first report to the legislature required in section 2 of this act.

5 SB 5096 the first report to the legislature required in section 2 of this act.

(7) TheFor commission shall conduct market research for the purposes of,of orthis tosection, support, a future"professional applicationorganization" toincludes thean federalentity governmentwhose formembers aare programengaged to assist in thea purchaseparticular oflawful anvocation, interestoccupation, inor anfield employeeof stockactivity ownershipof plana qualifyingspecialized undernature sectionincluding, 401but ofnot thelimited internalto, revenueassociations, code,boards, workereducational cooperative,institutions, orand relatednonprofit broad-basedorganizations. employee ownership vehicle.

(8) For purposes of this section, a "professional organization" includes an entity whose members are engaged in a particular lawful vocation, occupation, or field of activity of a specialized nature including, but not limited to, associations, boards, educational institutions, and nonprofit organizations.

(3) It is the legislature's specific public policy objective to encourage business owners to create an employee stock ownership plan or employee ownership trust, or to convert to a worker-owned p.cooperative, that allows the company to share ownership with their employees without requiring employees to invest their own money.

6 SSB 5096 cooperative, that allows the company to share ownership with their employees without requiring employees to invest their own money.

NEWp. SECTION.

6 SB 5096 NEW SECTION.

p.(4)(a) The total amount of credits authorized under this section may not exceed an annual statewide limit of $2,000,000.

7 SSB 5096 (4)(a) The total amount of credits authorized under this section may not exceed an annual statewide limit of $2,000,000.

(b)p. Every person claiming a credit under this section must preserve, for a period of five years, any documentation to substantiate the amount of credit claimed.

7 SB 5096 (b) Every person claiming a credit under this section must preserve, for a period of five years, any documentation to substantiate the amount of credit claimed.

4975(e)(7), as ofamended. the effective date of this section.

p.(7) Credits allowed under this section can be earned for tax reporting periods starting on or before June 30, 2029.

8 SSB 5096 (7) Credits allowed under this section can be earned for tax reporting periods starting on or before June 30, 2029.

Subject to the availability of funding, the small business collateral support program administered by the Washington state department of commerce as part of the state small business credit initiative program must include program eligibility for the purchase of an interest in an employee stock ownership plan qualifying under section 401 of the internal revenue code, worker p.

8 SB 5096 cooperative, or related broad-based employee ownership vehicle, provided that the transaction results in the employee stock ownership plan or other employee-owned entity holding a majority interest, on a fully diluted basis, in the business.

NEW SECTION.