| Summary |
The bill creates 2 income tax subtractions for income tax years
commencing on or after January 1, 2027, but before January 1, 2038. The
first subtraction is for an amount equal to state capital gains that are
realized by a taxpayer during the taxable year for the conversion by an
increment of at least 20% ownership to a qualified employee-owned
business of a qualified business. The taxpayers that are eligible for this
subtraction are the same taxpayers that would be eligible for the tax credit
for conversion costs for employee business ownership.
The second subtraction is allowed to worker-owned cooperatives
in an amount equal to the worker-owned cooperative's federal taxable
income for the tax year not to exceed $1 million.
The bill also makes changes to the tax credit for conversion costs
for employee business ownership (credit). Under current law, the credit
is available through income tax year 2026. The bill extends the credit
through income tax year 2037. The bill also specifies that the aggregate
amount of credits that can be claimed for each income tax year
commencing on or after January 1, 2026, but before January 1, 2032, is
$3 million and that the aggregate amount of credits that can be claimed
for each income tax year commencing on or after January 1, 2032, but
before January 1, 2038, is $4 million. The percentage of conversion or
expansion costs that are eligible to be claimed for the credit is currently
50%; however, the bill increases this percentage to 75% beginning in tax
year 2026 while maintaining the existing dollar caps for the different
methods of conversion.
Additionally, the bill revises several definitions to expand
eligibility for the credit and allows for qualified support entities, which
are nonprofit organizations that provide services to businesses that qualify
under the credit to convert or expand to employee-ownership, to be
eligible to receive the credit for up to 75% of the costs incurred for
providing such support, including for staff salaries and benefits,
marketing and outreach, and consulting and technical assistance not to
exceed $167,000.
The bill makes conforming amendments to several of the credit's
expanded definitions that are also applicable to the tax credit for new
employee-owned businesses.
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