The U.S. has a growing understanding of the benefits of employee ownership. Now is the moment to expand policies to support and grow EO businesses across the economy.

Benefits of supportive public policies:

• Can scale up the EO movement.
• Can ensure that marginalized communities have more just and equitable opportunities through employee-owned businesses. 

Recent State Policies on Employee Ownership

       Tax Incentive Examples

• Colorado: The first state to provide funding to cover coop conversion expenses by passing H.B. 21-1311 in 2021).  CO also increased its technical assistance support for employee ownership activities in 2023. https://www.nceo.org/article/state-legislation-employee-ownership.

• Iowa (House File 2284,2012).  Iowa provides a 50% reduction in Iowa 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. https://www.nceo.org/article/state-legislation-employee-ownership

• Nebraska:  In 2013, Nebraska amended a 1987 bill (LB 775) that provides Nebraska residents with a one-time capital gains tax exclusion from the sale of stock in an employee-owned company. 

City policies

• NY: Direct financial support, Space & Infrastructure, Education &Technical Assistance, Preferential City Procurement Policies
• Financial Support: Austin (TX), Cleveland (OH), Madison (WI), Minneapolis (MN), Richmond (CA), Richmond (OH), Rochester (VA), Boston (MA), Philadelphia (PA), 
• See a sample of supportive worker cooperative ordinances and resolutions here. (link to Sustainable Economies Law Center). 

Future policy ideas (at the local, regional, and federal levels)

• Development of Social Cooperatives: Legislation could be passed to create tax benefits for participating social cooperatives and organizations to support marginalized communities. Social cooperatives are organized to fulfill a public benefit mission, more than to seek profits for owners. See the example of South Korea, Italy, Spain, etc.

• Indivisible Reserves: Some countries, such as Italy, Quebec, and Spain, have policies allowing cooperatives to set aside some net earnings, tax-free, for future purposes that support the employee-owned cooperative. 

• Give workers the Right of First Refusal to purchase the business they work at: A right of first refusal is a contractual right giving its holder the option to transact with the other contracting party before others can.  69% of Americans said YES to providing a right of first refusal for employees so that employees have the first right to purchase the company before the owner sells it to others.

• More tax incentives for selling owners: increase tax incentives at the local and federal levels for owners who sell their businesses to their employees. 

• Preferred Procurement for Cooperatives: Cooperatives need more opportunities to sell their products & services. Cities, states, and the federal government could pass policies granting preferred procurement and contracting rights to employee-owned businesses.

Resources 

– How to Scale Up the Cooperative Movement?

– Cities Developing Worker Coops: Efforts in Ten Cities (Michelle Camou)

– Employee Ownership NYC: State and Local Policy Supports (Urban Institute)