Senate passes Padden bill to benefit employee stock ownership plans

The Senate today unanimously passed Senate Bill 5096, a bipartisan proposal introduced by 4th District Sen. Mike Padden that would aid businesses looking to adopt an employee stock ownership plan (ESOP) corporate structure.

During his floor speech on SB 5096, Padden mentioned the many benefits to employee ownership.

“This bill promotes employee ownership, which I think is a very valuable thing, not only for our employees but for society,” said Padden, R-Spokane Valley. “Studies have shown that 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 stay locally.”

Padden added that the bill would help those businesses looking to adopt an ESOP.

“Many current business owners do not have a plan for when they transition out of the business, and employee ownership provides a valuable option.”

SB 5096 specifically would:

  • 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.
  • Provide a business and occupation tax credit for costs related to converting a qualifying business to an employee ownership structure.

The proposal is backed by a very diverse group of supporters, including the Spokane Valley Chamber of Commerce and Schweitzer Engineering Laboratories.

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.

The bill now goes to the House for further consideration.