2023 - 2024 LEGISLATURE
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2023 ASSEMBLY BILL 1217
April 11, 2024 - Introduced by Representatives MADISON, MOORE OMOKUNDE, C.
ANDERSON, STUBBS, CLANCY and BARE. Referred to Committee on Ways and
Means.
1 AN ACT to amend 71.05 (6) (a) 15., 71.21 (4) (a), 71.26 (2) (a) 4., 71.34 (1k) (g),
2 71.45 (2) (a) 10. and 238.12 (1); and to create 71.05 (6) (b) 57., 71.07 (11), 71.10
3 (4) (em), 71.26 (1) (j), 71.28 (11), 71.30 (3) (am), 71.45 (1) (e), 71.47 (11), 71.49
4 (1) (am) and 238.309 of the statutes; relating to: creating an employee
5 ownership conversion costs tax credit and an exemption for capital gains from
6 the transfer of a business to employee ownership.
Analysis by the Legislative Reference Bureau
This bill creates tax incentives related to businesses in this state converting to
an employee ownership business structure.
Employee ownership conversion costs tax credit
Under the bill, the Wisconsin Economic Development Corporation may certify
a business to claim a nonrefundable income tax credit for an amount equal to 70
percent of costs related to converting the business to a worker-owned cooperative or
50 percent of the costs related to converting the business to an employee ownership
trust or an employee stock ownership plan. The credit is limited to a maximum
amount of $100,000. A business is qualified to receive the credit if the business is
subject to income and franchise taxes in this state and, at the time the business
receives the credit, is not owned in whole or in part by an employee ownership trust,
does not have an employee stock ownership plan, and is not, in whole or in part, a
worker-owned cooperative.
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ASSEMBLY BILL 1217
Capital gain exemption
The bill also creates an individual income tax subtraction and a corporate
income and franchise tax exemption for the amount of the capital gain realized from
the transfer of ownership of a business in this state to an employee stock ownership
plan, a worker-owned cooperative, or an employee ownership trust. Under the bill,
the subtraction or exemption may not be claimed for a taxable year unless the
business whose transfer results in a capital gain has entered a labor peace agreement
with the labor organization representing the employees of the business for that
taxable year.
Because this bill relates to an exemption from state or local taxes, it may be
referred to the Joint Survey Committee on Tax Exemptions for a report to be printed
as an appendix to the bill.
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:
1 SECTION 1. 71.05 (6) (a) 15. of the statutes is amended to read:
2 71.05 (6) (a) 15. The amount of the credits computed under s. 71.07 (2dm),
3 (2dx), (2dy), (3g), (3h), (3n), (3q), (3s), (3t), (3w), (3wm), (3y), (4k), (4n), (5e), (5i), (5j),
4 (5k), (5r), (5rm), (6n), and (10), and (11) and not passed through by a partnership,
5 limited liability company, or tax-option corporation that has added that amount to
6 the partnership's, company's, or tax-option corporation's income under s. 71.21 (4)
7 or 71.34 (1k) (g).
8 SECTION 2. 71.05 (6) (b) 57. of the statutes is created to read:
9 71.05 (6) (b) 57. a. For taxable years beginning after December 31, 2023, to the
10 extent otherwise included in Wisconsin taxable income if not for this subdivision, the
11 amount of the capital gain as computed under the Internal Revenue Code from the
12 transfer of ownership of a business in this state to an employee stock ownership plan,
13 a worker-owned cooperative, or an employee ownership trust.
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ASSEMBLY BILL 1217 SECTION 2
1 b. No modification may be claimed under this subdivision unless an employee
2 stock ownership plan, worker-owned cooperative, or employee ownership trust owns
3 more than 50 percent of the business whose transfer results in a capital gain
4 described in subd. 57. a.
5 c. No modification may be claimed for a taxable year under this subdivision
6 unless the business whose transfer results in a capital gain described in subd. 57. a.
7 has entered a labor peace agreement, as defined in s. 238.309 (1) (d), with the labor
8 organization representing the employees of the business for the taxable year.
9 d. In this subdivision, “employee ownership trust” has the meaning given in s.
10 238.309 (1) (b).
11 e. In this subdivision, “employee stock ownership plan” has the meaning given
12 in 26 USC 4975 (e) (7).
13 f. In this subdivision, “worker-owned cooperative” has the meaning given for
14 “eligible worker-owned cooperative” in 26 USC 1042 (c) (2).
15 SECTION 3. 71.07 (11) of the statutes is created to read:
16 71.07 (11) EMPLOYEE OWNERSHIP CONVERSION COSTS CREDIT. (a) Definitions. In
17 this subsection:
18 1. “Claimant” means a person that owns an interest in a qualified business
19 prior to its conversion to a employee ownership trust, employee stock ownership
20 plan, or worker-owned cooperative and that files a claim under this subsection.
21 2. “Conversion costs” has the meaning given in s. 238.309 (1) (a).
22 3. “Employee ownership trust” has the meaning given in s. 238.309 (1) (b).
23 4. “Employee stock ownership plan” has the meaning given in 26 USC 4975 (e)
24 (7).
25 5. “Qualified business” has the meaning given in s. 238.309 (1) (e).
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ASSEMBLY BILL 1217 SECTION 3
1 6. “Worker-owned cooperative” has the meaning given for “eligible
2 worker-owned cooperative” in 26 USC 1042 (c) (2).
3 (b) Filing claims. For taxable years beginning after December 31, 2023, and
4 subject to the limitations provided in this subsection, a claimant may claim as a
5 credit against the tax imposed under s. 71.02 for the taxable year during which a
6 conversion to a employee ownership trust, employee stock ownership plan, or
7 worker-owned cooperative is complete, up to the amount of those taxes, all of the
8 following:
9 1. An amount equal to 70 percent of the conversion costs, up to $100,000,
10 incurred by a qualified business for converting to a worker-owned cooperative.
11 2. An amount equal to 50 percent of the conversion costs, up to $100,000,
12 incurred by a qualified business for converting to an employee ownership trust or an
13 employee stock ownership plan.
14 (c) Limitations. 1. No credit is allowed under this subsection for a taxable year
15 if the qualified business has not entered into a labor peace agreement, as defined in
16 s. 238.309 (1) (d), with the labor organization representing the employees of the
17 business for the taxable year.
18 2. No credit may be allowed under this subsection unless the claimant files an
19 application with the Wisconsin Economic Development Corporation, at the time and
20 in the manner prescribed by the Wisconsin Economic Development Corporation, and
21 the Wisconsin Economic Development Corporation approves the application. The
22 claimant shall submit a copy of the certification under s. 238.309 (3) with the
23 claimant's return.
24 3. Partnerships, limited liability companies, and tax-option corporations may
25 not claim the credit under this subsection, but the eligibility for and the amount of
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ASSEMBLY BILL 1217 SECTION 3
1 the credit are based on the amounts paid by the entities under par. (b). A
2 partnership, limited liability company, or tax-option corporation shall compute the
3 amount of the credit that each of its partners, members, or shareholders may claim
4 and shall provide that information to each of them. Partners, members, and
5 shareholders may claim the credit in proportion to their ownership interests.
6 (d) Administration. Section 71.28 (4) (e) to (h), as it applies to the credit under
7 s. 71.28 (4), applies to the credit under this subsection.
8 SECTION 4. 71.10 (4) (em) of the statutes is created to read:
9 71.10 (4) (em) Employee ownership conversion costs credit under s. 71.07 (11).
10 SECTION 5. 71.21 (4) (a) of the statutes is amended to read:
11 71.21 (4) (a) The amount of the credits computed by a partnership under s.
12 71.07 (2dm), (2dx), (2dy), (3g), (3h), (3n), (3q), (3s), (3t), (3w), (3wm), (3y), (4k), (4n),
13 (5e), (5g), (5i), (5j), (5k), (5r), (5rm), (6n), and (10), and (11) and passed through to
14 partners shall be added to the partnership's income.
15 SECTION 6. 71.26 (1) (j) of the statutes is created to read:
16 71.26 (1) (j) Capital gain from transfer of business to employee ownership. 1.
17 The amount of the capital gain as computed under the Internal Revenue Code from
18 the transfer of ownership of a business in this state to an employee stock ownership
19 plan, a worker-owned cooperative, or an employee ownership trust.
20 2. The exemption under this paragraph does not apply unless an employee
21 stock ownership plan, worker-owned cooperative, or employee ownership trust owns
22 more than 50 percent of the business whose transfer results in a capital gain
23 described in subd. 1.
24 3. The exemption under this paragraph does not apply for a taxable year unless
25 the business whose transfer results in a capital gain described in subd. 1. has entered
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ASSEMBLY BILL 1217 SECTION 6
1 a labor peace agreement, as defined in s. 238.309 (1) (d), with the labor organization
2 representing the employees of the business for the taxable year.
3 4. In this paragraph, “employee ownership trust” has the meaning given in s.
4 238.309 (1) (b).
5 5. In this paragraph, “employee stock ownership plan” has the meaning given
6 in 26 USC 4975 (e) (7).
7 6. In this paragraph, “worker-owned cooperative” has the meaning given for
8 “eligible worker-owned cooperative” in 26 USC 1042 (c) (2).
9 SECTION 7. 71.26 (2) (a) 4. of the statutes is amended to read:
10 71.26 (2) (a) 4. Plus the amount of the credit computed under s. 71.28 (1dm),
11 (1dx), (1dy), (3g), (3h), (3n), (3q), (3t), (3w), (3wm), (3y), (5e), (5g), (5i), (5j), (5k), (5r),
12 (5rm), (6n), and (10), and (11) and not passed through by a partnership, limited
13 liability company, or tax-option corporation that has added that amount to the
14 partnership's, limited liability company's, or tax-option corporation's income under
15 s. 71.21 (4) or 71.34 (1k) (g).
16 SECTION 8. 71.28 (11) of the statutes is created to read:
17 71.28 (11) EMPLOYEE OWNERSHIP CONVERSION COSTS CREDIT. (a) Definitions. In
18 this subsection:
19 1. “Claimant” means a person that owns an interest in a qualified business
20 prior to its conversion to a employee ownership trust, employee stock ownership
21 plan, or worker-owned cooperative and that files a claim under this subsection.
22 2. “Conversion costs” has the meaning given in s. 238.309 (1) (a).
23 3. “Employee ownership trust” has the meaning given in s. 238.309 (1) (b).
24 4. “Employee stock ownership plan” has the meaning given in 26 USC 4975 (e)
25 (7).
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ASSEMBLY BILL 1217 SECTION 8
1 5. “Qualified business” has the meaning given in s. 238.309 (1) (e).
2 6. “Worker-owned cooperative” has the meaning given for “eligible
3 worker-owned cooperative” in 26 USC 1042 (c) (2).
4 (b) Filing claims. For taxable years beginning after December 31, 2023, and
5 subject to the limitations provided in this subsection, a claimant may claim as a
6 credit against the tax imposed under s. 71.23 for the taxable year during which a
7 conversion to a employee ownership trust, employee stock ownership plan, or
8 worker-owned cooperative is complete, up to the amount of those taxes, all of the
9 following:
10 1. An amount equal to 70 percent of the conversion costs, up to $100,000,
11 incurred by a qualified business for converting to a worker-owned cooperative.
12 2. An amount equal to 50 percent of the conversion costs, up to $100,000,
13 incurred by a qualified business for converting to an employee ownership trust or an
14 employee stock ownership plan.
15 (c) Limitations. 1. No credit is allowed under this subsection for a taxable year
16 if the qualified business has not entered into a labor peace agreement, as defined in
17 s. 238.309 (1) (d), with the labor organization representing the employees of the
18 business for the taxable year.
19 2. No credit may be allowed under this subsection unless the claimant files an
20 application with the Wisconsin Economic Development Corporation, at the time and
21 in the manner prescribed by the Wisconsin Economic Development Corporation, and
22 the Wisconsin Economic Development Corporation approves the application. The
23 claimant shall submit a copy of the certification under s. 238.309 (3) with the
24 claimant's return.
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ASSEMBLY BILL 1217 SECTION 8
1 3. Partnerships, limited liability companies, and tax-option corporations may
2 not claim the credit under this subsection, but the eligibility for and the amount of
3 the credit are based on the amounts paid by the entities under par. (b). A
4 partnership, limited liability company, or tax-option corporation shall compute the
5 amount of the credit that each of its partners, members, or shareholders may claim
6 and shall provide that information to each of them. Partners, members, and
7 shareholders may claim the credit in proportion to their ownership interests.
8 (d) Administration. Subsection (4) (e) to (h), as it applies to the credit under
9 sub. (4), applies to the credit under this subsection.
10 SECTION 9. 71.30 (3) (am) of the statutes is created to read:
11 71.30 (3) (am) Employee ownership conversion costs credit under s. 71.28 (11).
12 SECTION 10. 71.34 (1k) (g) of the statutes is amended to read:
13 71.34 (1k) (g) An addition shall be made for credits computed by a tax-option
14 corporation under s. 71.28 (1dm), (1dx), (1dy), (3), (3g), (3h), (3n), (3q), (3t), (3w),
15 (3wm), (3y), (4), (5), (5e), (5g), (5i), (5j), (5k), (5r), (5rm), (6n), and (10), and (11) and
16 passed through to shareholders.
17 SECTION 11. 71.45 (1) (e) of the statutes is created to read:
18 71.45 (1) (e) 1. The amount of the capital gain as computed under the Internal
19 Revenue Code from the transfer of ownership of a business in this state to an
20 employee stock ownership plan, a worker-owned cooperative, or an employee
21 ownership trust.
22 2. The exemption under this paragraph does not apply unless an employee
23 stock ownership plan, worker-owned cooperative, or employee ownership trust owns
24 more than 50 percent of the business whose transfer results in a capital gain
25 described in subd. 1.
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ASSEMBLY BILL 1217 SECTION 11
1 3. The exemption under this paragraph does not apply for a taxable year unless
2 the business whose transfer results in a capital gain described in subd. 1. has entered
3 a labor peace agreement, as defined in s. 238.309 (1) (d), with the labor organization
4 representing the employees of the business for the taxable year.
5 4. In this paragraph, “employee ownership trust” has the meaning given in s.
6 238.309 (1) (b).
7 5. In this paragraph, “employee stock ownership plan” has the meaning given
8 in 26 USC 4975 (e) (7).
9 6. In this paragraph, “worker-owned cooperative” has the meaning given for
10 “eligible worker-owned cooperative” in 26 USC 1042 (c) (2).
11 SECTION 12. 71.45 (2) (a) 10. of the statutes is amended to read:
12 71.45 (2) (a) 10. By adding to federal taxable income the amount of cred