Tennessee 2025-2026 Regular Session

Tennessee House Bill HB1047 Compare Versions

Only one version of the bill is available at this time.

Old	New	Differences
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2	2	SENATE BILL 40
3	3	By Walley
4	4
5	5	HOUSE BILL 1047
6	6	By Marsh
7	7
8	8
9	9	HB1047
10	10	000042
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13	13	AN ACT to amend Tennessee Code Annotated, Title 4;
14	14	Title 8; Title 9; Title 12, Chapter 3; Title 45; Title
15	15	50; Title 56, Chapter 1 and Title 67, relative to
16	16	employee-owned businesses.
17	17
18	18	BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF TENNESSEE:
19	19	SECTION 1. This act is known and may be cited as the "Employee Ownership,
20	20	Empowerment, and Expansion Act."
21	21	SECTION 2. Tennessee Code Annotated, Title 67, Chapter 4, Part 20, is amended by
22	22	adding the following as a new section:
23	23	67-4-2024.
24	24	(a) The purposes of this section are to:
25	25	(1) Provide an incentive for businesses to establish employee stock
26	26	ownership plans or employee ownership trusts or to convert to a worker-owned
27	27	cooperative, which allows companies to share ownership with employees without
28	28	requiring employees to invest their own money; and
29	29	(2) Encourage business owners to sell, through three (3) different
30	30	options, their businesses to the very employees that contributed to their success.
31	31	(b) As used in this section:
32	32	(1) "Conversion costs":
33	33	(A) Means all costs incurred by a qualified business for the
34	34	transition of a business to an employee ownership trust, an employee
35	35	stock ownership plan, or a worker-owned cooperative; and
36	36	(B) Includes, but is not limited to:
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38	38
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41	41	(i) The cost of professional services, including accounting,
42	42	legal, and business advisory services;
43	43	(ii) Expenses necessary or incident to determining the
44	44	feasibility and structure of the conversion; and
45	45	(iii) The cost of tax planning, audits, valuations, travel, pro-
46	46	formas, and trustee or third-party administration;
47	47	(2) "Employee ownership trust" means an indirect form of employee
48	48	ownership in which a trust holds a controlling stake in a qualified business and
49	49	benefits all employees on an equal basis;
50	50	(3) "Employee stock ownership plan" has the same meaning as set forth
51	51	in § 4975(e)(7) of the Internal Revenue Code (26 U.S.C. § 4975(e)(7)), as
52	52	amended;
53	53	(4) "Qualified business" means a taxpayer subject to tax under this part,
54	54	including a C corporation, S corporation, limited liability company, or limited
55	55	liability partnership, that:
56	56	(A)
57	57	(i) Is not owned in whole or in part by an employee
58	58	ownership trust;
59	59	(ii) Does not have an employee stock ownership plan; or
60	60	(iii) Is not, in whole or in part, a worker-owned cooperative;
61	61	and
62	62	(B) Is approved by the department for the tax incentives in this
63	63	section; and
64	64	(5) "Worker-owned cooperative" has the same meaning as set forth in §
65	65	1042(c)(2) of the Internal Revenue Code (26 U.S.C. § 1042(c)(2)), as amended.
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67	67
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70	70	(c) For tax years commencing on or after January 1, 2026, but prior to January
71	71	1, 2031, there is allowed a credit with respect to the taxes imposed pursuant to this part
72	72	in the tax year in which the conversion is completed, as follows:
73	73	(1) Up to fifty percent (50%) of the conversion costs, not to exceed
74	74	twenty-five thousand dollars ($25,000), incurred by a qualified business for
75	75	converting the qualified business to a worker-owned cooperative or an employee
76	76	ownership trust; or
77	77	(2) Up to fifty percent (50%) of the conversion costs, not to exceed one
78	78	hundred thousand dollars ($100,000), incurred by a qualified business for
79	79	converting the qualified business to an employee stock ownership plan.
80	80	(d) To request a credit, the taxpayer shall file an application with the
81	81	commissioner on a form prescribed by the commissioner, and include a cost certification
82	82	of the estimated conversion costs.
83	83	(e) The commissioner may conduct audits or require the filing of additional
84	84	information necessary to substantiate or adjust the amount of the credit allowed by this
85	85	section, and to determine that the taxpayer has complied with all statutory requirements
86	86	for the credit.
87	87	(f) The commissioner shall review the documentation submitted by the taxpayer
88	88	and notify the taxpayer of the approved credit.
89	89	(g) Unused credit may be carried forward in any tax period until the credit is
90	90	taken; provided, however, that the credit must not be carried forward for more than
91	91	twenty-five (25) years.
92	92	(h) The department shall conduct statewide outreach efforts, within existing
93	93	resources, to minority-owned businesses, as defined in § 4-28-102, about the availability
94	94	of the tax credit allowed in this section.
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99	99	(i) The commissioner is authorized to promulgate rules to effectuate the
100	100	purposes of this section. The rules must be promulgated in accordance with the Uniform
101	101	Administrative Procedures Act, compiled in title 4, chapter 5.
102	102	(j) On or before January 1, 2026, the department shall submit a one-time report
103	103	to the finance, ways and means committees of the house of representatives and the
104	104	senate, setting forth the clear, relevant, and ascertainable metrics and data requirements
105	105	that the department will track under this section in order to allow the general assembly to
106	106	measure the effectiveness of the tax expenditure allowed in this section in achieving the
107	107	purposes set forth in subsection (a).
108	108	SECTION 3. Tennessee Code Annotated, Section 67-4-712, is amended by adding the
109	109	following as a new subsection:
110	110	(g) The tax imposed by this part does not apply to a worker-owned cooperative,
111	111	an employee ownership trust, or an employee stock ownership plan, as defined in § 67-
112	112	4-2024.
113	113	SECTION 4. Tennessee Code Annotated, Section 12-3-1102, is amended by adding
114	114	the following as new, appropriately designated subdivisions:
115	115	( ) "Employee ownership trust" means an indirect form of employee ownership
116	116	in which a trust holds a controlling stake in a qualified business and benefits all
117	117	employees on an equal basis;
118	118	( ) "Tennessee employee-owned business" means a business that is a
119	119	continuing, independent, for-profit business that performs a commercially useful function,
120	120	and is at least fifty-one percent (51%) owned and controlled by:
121	121	(A) An employee ownership trust;
122	122	(B) An employee stock ownership plan as defined in 26 U.S.C. §
123	123	4975(e)(7); or
124	124
125	125
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128	128	(C) A worker-owned cooperative as defined in 26 U.S.C. § 1042(c)(2).
129	129	SECTION 5. Tennessee Code Annotated, Section 12-3-1103(a), is amended by
130	130	inserting the language "Tennessee employee-owned businesses," immediately before the
131	131	language "and small businesses".
132	132	SECTION 6. Tennessee Code Annotated, Section 12-3-1104, is amended by inserting
133	133	the language "Tennessee employee-owned business," immediately before the language "or
134	134	small business" wherever it appears in subdivision (a)(1) and subsections (b) and (c).
135	135	SECTION 7. Tennessee Code Annotated, Section 12-3-1104(a)(2), is amended by
136	136	inserting the language "Tennessee employee-owned businesses," immediately after the
137	137	language "disabilities," wherever it appears; and by deleting the language "five (5)
138	138	subcategories of businesses" and substituting instead the language "six (6) subcategories of
139	139	businesses".
140	140	SECTION 8. Tennessee Code Annotated, Title 12, Chapter 3, Part 11, is amended by
141	141	inserting the language "Tennessee employee-owned business," immediately before the
142	142	language "or small business" wherever it appears in Sections 12-3-1105, 12-3-1106, and 12-3-
143	143	1107.
144	144	SECTION 9.
145	145	(a) Section 3 of this act takes effect January 1, 2026, the public welfare requiring
146	146	it, and applies to tax periods that begin on or after January 1, 2026.
147	147	(b) Sections 4, 5, 6, 7, and 8 of this act take effect July 1, 2025, the public
148	148	welfare requiring it.
149	149	(c) All remaining sections of this act take effect upon becoming a law, the public
150	150	welfare requiring it, and apply to tax periods that begin on or after January 1, 2026.