SB460: Bill Text

LRB-0361/2

AG/JK/MPG:amn&wlj

2017 - 2018 LEGISLATURE

2017 Senate BILL 460

October 18, 2017 - Introduced by Senators Hansen, Bewley, Carpenter, Miller and Ringhand, cosponsored by Representatives Genrich, Anderson, Berceau, Crowley, Ohnstad, Spreitzer, C. Taylor and Vruwink. Referred to Committee on Economic Development, Commerce and Local Government.

SB460,1,6 An Act to create 16.75 (3r), 36.25 (54), 71.05 (6) (b) 53., 71.05 (6) (b) 54., 71.26 (1) (ab), 71.26 (2) (a) 13., 71.26 (2) (a) 14., 71.26 (2) (a) 15., 73.17 and 238.147 of the statutes; relating to: providing loans, loan guarantees, tax benefits, and procurement preferences to employee-owned companies, establishing a center for employee ownership in the University of Wisconsin System, and granting rule-making authority.

Analysis by the Legislative Reference Bureau

This bill requires the Board of Regents of the University of Wisconsin System to establish and maintain a center for employee ownership to provide education and outreach to inform business owners about the benefits of employee ownership successions, including providing initial consultations to business owners exploring the possibility of transferring full or partial ownership to employees. In addition, the bill requires the Wisconsin Economic Development Corporation to establish an economic development program to make employee ownership loans or loan guarantees to finance an eligible transaction. Under the bill, an “eligible transaction” is the transfer of shares of a corporation or member interests of a limited liability company to an employee stock ownership plan, an employee ownership trust, or a direct share ownership plan.

The bill also provides certain income and franchise tax benefits to an employee-owned business, such as excluding from taxation the income of an employee ownership trust. Under the bill, an employee ownership trust has the exclusive purposes of creating employee ownership by obtaining and holding shares or member interests of an employer and of promoting the financial and nonfinancial interests of all tenured employees. The bill defines “tenured employee” to mean any employee or independent contractor who has provided at least 1,000 hours of service to the employer within the immediately preceding 12-month period.

Finally, the bill provides that the Department of Administration must attempt to ensure that 5 percent of the total amount expended to procure tangible personal property and services is paid to businesses in which a certain percentage of the employer stock or membership interest is held by an employee stock ownership plan or employee ownership trust or held through a direct share ownership plan.

For further information see the state fiscal estimate, which will be printed as an appendix to this bill.

The people of the state of Wisconsin, represented in senate and assembly, do enact as follows:

SB460,1 Section 1. 16.75 (3r) of the statutes is created to read:

SB460,2,2 16.75 (3r) (a) In this subsection:

SB460,2,3 1. “Direct share ownership plan” has the meaning given in s. 73.17 (1) (a).

SB460,2,4 2. “Employee ownership trust” has the meaning given in s. 73.17 (1) (e).

SB460,2,5 3. “Employee stock ownership plan” has the meaning given in s. 73.17 (1) (f).

SB460,2,6 4. “Qualified transfer” has the meaning given in s. 73.17 (1) (h).

SB460,2,7 5. “Tenured employee” has the meaning given in s. 73.17 (1) (i).

SB460,2,11 (b) 1. The department, any agency to which the department delegates purchasing authority under s. 16.71 (1), and any agency making purchases under s. 16.74 shall attempt to ensure that 5 percent of the total amount expended under this subchapter in each fiscal year is paid to businesses that satisfy any of the following:

SB460,2,14 a. A percentage, as established by the department by rule, of employer stock or membership interest, of the type required for a qualified transfer, is held by an employee stock ownership plan or employee ownership trust.

SB460,3,6 b. A percentage, as established by the department by rule, of employer stock or membership interest, of the type required for a qualified transfer, is held through a direct share ownership plan where the ownership stake of the direct share ownership plan is calculated by determining the smallest amount of such stock or membership interest held by a tenured employee, multiplied by the total number of tenured employees.

SB460,3,10 c. A percentage, as established by the department by rule, of nonprofit corporation membership, with voting power equal to or in excess of that class of membership having the greatest voting power, is held by all tenured employees as a class, and the tenured employees vote as members on a one person, one vote basis.

SB460,3,21 2. Except as provided under sub. (7), the department, any agency to which the department delegates purchasing authority under s. 16.71 (1), and any agency making purchases under s. 16.74 may purchase materials, supplies, equipment, and contractual services from any business specified in subd. 1. a., b., or c. submitting a qualified responsible competitive bid that is no more than 5 percent higher than the apparent low bid or competitive proposal that is no more than 5 percent higher than the most advantageous proposal. In administering the preference for businesses specified in subd. 1. a., b., and c. established in this paragraph, the department, the delegated agency, and any agency making purchases under s. 16.74 shall maximize the use of businesses specified in subd. 1. a., b., and c. that are incorporated under ch. 180 or that have their principal place of business in this state.

SB460,2 Section 2 . 36.25 (54) of the statutes is created to read:

SB460,3,25 36.25 (54) Center for employee ownership. (a) The board shall establish and maintain a center for employee ownership at a location within the system determined by the board.

SB460,4,1 (b) The center for employee ownership shall do all of the following:

SB460,4,4 1. Provide education and outreach to inform business owners about the benefits of employee ownership successions and the provisions of ss. 16.75 (3r) (b), 71.05 (6) (b) 53. and 54., 71.26 (1) (ab) and (2) (a) 13., 14., and 15., 73.17, and 238.147.

SB460,4,5 2. Organize workshops and conferences on employee ownership successions.

SB460,4,7 3. Prepare and distribute materials concerning employee ownership successions.

SB460,4,9 4. Provide initial consultations to business owners exploring the possibility of transferring full or partial ownership to employees.

SB460,4,11 5. Provide a referral service to help business owners find legal, financial, and technical advice in connection with employee ownership successions.

SB460,4,14 6. Partner with key organizations, such as professional and trade associations, financial institutions, unions, economic development organizations, and other nonprofit entities, to promote employee ownership successions.

SB460,4,15 7. Support the growth of associations of employee-owned companies.

SB460,4,17 (c) In addition to its responsibilities under par. (b), the center for employee ownership shall do all of the following:

SB460,4,19 1. Provide access to information regarding government rules and regulations that relate to employee ownership.

SB460,4,21 2. Develop, in partnership with appropriate state and local government agencies, proposals for changes in policies to promote employee ownership.

SB460,4,23 3. Conduct investigations, research, studies, and analyses on the subject of employee ownership.

SB460,3 Section 3. 71.05 (6) (b) 53. of the statutes is created to read:

SB460,5,8 71.05 (6) (b) 53. For taxable years beginning after December 31, 2016, income, including all gains not excluded from taxation under subd. 9., derived from a qualified transfer, as defined in s. 73.17 (1) (h), except that the amount of income derived from the qualified transfer to a direct share ownership plan, as defined in s. 73.17 (1) (a), that may be excluded under this subdivision may not exceed the amount of income derived in the taxable year from the smallest amount of shares or member interests transferred to a tenured employee, as defined in s. 73.17 (1) (i), multiplied by the number of all tenured employees.

SB460,4 Section 4. 71.05 (6) (b) 54. of the statutes is created to read:

SB460,5,15 71.05 (6) (b) 54. For taxable years beginning after December 31, 2016, income derived from shares or member interests distributed through a direct share ownership plan, as defined in s. 73.17 (1) (a), except that the amount of the income that may be excluded under this subdivision may not exceed the amount of income derived in the taxable year from the smallest amount of shares or member interests distributed to a tenured employee, as defined in s. 73.17 (1) (i).

SB460,5 Section 5 . 71.26 (1) (ab) of the statutes is created to read:

SB460,5,18 71.26 (1) (ab) Employee ownership trust. Income of an employee ownership trust, as defined in s. 73.17 (1) (e).

SB460,6 Section 6. 71.26 (2) (a) 13. of the statutes is created to read:

SB460,5,22 71.26 (2) (a) 13. For taxable years beginning after December 31, 2016, minus the amount of the interest income derived from an employee ownership loan, as defined in s. 73.17 (1) (d).

SB460,7 Section 7. 71.26 (2) (a) 14. of the statutes is created to read:

SB460,6,3 71.26 (2) (a) 14. a. For taxable years beginning after December 31, 2016, minus the amount of contributions to an employee ownership trust, as defined in s. 73.17 (1) (e), or to a direct share ownership plan, as defined in s. 73.17 (1) (a), including contributions applied to repayment of principal and interest on an employee ownership loan, as defined in s. 73.17 (1) (d).