Gov. Jay Inslee today signed Senate Bill 5096, a bipartisan measure prime-sponsored by 4th District Sen. Mike Padden that will aid businesses looking to adopt an employee stock ownership plan (ESOP) corporate structure.
“This new law will help promote employee ownership, which is valuable not only for employees but for our society,” said Padden, R-Spokane Valley. “Studies have shown that when employees are happier, they stay in their job longer and they retire in a much better financial position. And the companies are more likely to remain in the local area.”
Padden added that the measure will help maintain local businesses after a business founder retires.
“Many current business owners do not have a plan for when they transition out of the business, and employee ownership provides a valuable option,” Padden said.
SB 5096 specifically will:
- create the Washington Employee Ownership Program at the state Department of Commerce to offer technical support and other services to certain businesses considering certain employee ownership structures;
- form the Washington Employee Ownership Commission to oversee the program; and,
- provide a business-and-occupation tax credit for costs related to converting a qualifying business to an employee ownership structure.
The measure was backed by a diverse group, including the Spokane Valley Chamber of Commerce and Schweitzer Engineering Laboratories.
“According to decades of research, employee-owned companies consistently produce higher wages, greater employee wealth and fewer layoffs,” said Jack Moriarty, founder and executive director of Ownership America, a national think tank. “Senator Padden and his bipartisan co-sponsors deserve praise for their leadership in positioning Washington to create and retain high-quality jobs that build wealth for workers and communities through employee ownership.”
With the adoption of this bipartisan legislation, Washington has established itself as a national leader in the employee ownership field, added Moriarty.
ESOPs are recognized under federal tax law as a qualified defined contribution retirement plan. The ESOP must be designed to invest primarily in qualifying employer securities and meet certain other requirements. The IRS and United States Department of Labor share jurisdiction over some ESOP features.
SB 5096 was unanimously approved by both the Senate and House this year.