Wisconsin 2023-2024 Regular Session

Wisconsin Assembly Bill AB1217 Compare Versions

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

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2	2	MDE&KP:cdc
3	3	2023 - 2024 LEGISLATURE
4	4	2023 ASSEMBLY BILL 1217
5	5	April 11, 2024 - Introduced by Representatives MADISON, MOORE OMOKUNDE, C.
6	6	ANDERSON, STUBBS, CLANCY and BARE. Referred to Committee on Ways and
7	7	Means.
8	8	*AUTHORS SUBJECT TO CHANGE*
9	9	AN ACT to amend 71.05 (6) (a) 15., 71.21 (4) (a), 71.26 (2) (a) 4., 71.34 (1k) (g),
10	10	71.45 (2) (a) 10. and 238.12 (1); and to create 71.05 (6) (b) 57., 71.07 (11), 71.10
11	11	(4) (em), 71.26 (1) (j), 71.28 (11), 71.30 (3) (am), 71.45 (1) (e), 71.47 (11), 71.49
12	12	(1) (am) and 238.309 of the statutes; relating to: creating an employee
13	13	ownership conversion costs tax credit and an exemption for capital gains from
14	14	the transfer of a business to employee ownership.
15	15	Analysis by the Legislative Reference Bureau
16	16	This bill creates tax incentives related to businesses in this state converting to
17	17	an employee ownership business structure.
18	18	Employee ownership conversion costs tax credit
19	19	Under the bill, the Wisconsin Economic Development Corporation may certify
20	20	a business to claim a nonrefundable income tax credit for an amount equal to 70
21	21	percent of costs related to converting the business to a worker-owned cooperative or
22	22	50 percent of the costs related to converting the business to an employee ownership
23	23	trust or an employee stock ownership plan. The credit is limited to a maximum
24	24	amount of $100,000. A business is qualified to receive the credit if the business is
25	25	subject to income and franchise taxes in this state and, at the time the business
26	26	receives the credit, is not owned in whole or in part by an employee ownership trust,
27	27	does not have an employee stock ownership plan, and is not, in whole or in part, a
28	28	worker-owned cooperative.
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35	35	MDE&KP:cdc
36	36	ASSEMBLY BILL 1217
37	37	Capital gain exemption
38	38	The bill also creates an individual income tax subtraction and a corporate
39	39	income and franchise tax exemption for the amount of the capital gain realized from
40	40	the transfer of ownership of a business in this state to an employee stock ownership
41	41	plan, a worker-owned cooperative, or an employee ownership trust. Under the bill,
42	42	the subtraction or exemption may not be claimed for a taxable year unless the
43	43	business whose transfer results in a capital gain has entered a labor peace agreement
44	44	with the labor organization representing the employees of the business for that
45	45	taxable year.
46	46	Because this bill relates to an exemption from state or local taxes, it may be
47	47	referred to the Joint Survey Committee on Tax Exemptions for a report to be printed
48	48	as an appendix to the bill.
49	49	For further information see the state fiscal estimate, which will be printed as
50	50	an appendix to this bill.
51	51	The people of the state of Wisconsin, represented in senate and assembly, do
52	52	enact as follows:
53	53	SECTION 1. 71.05 (6) (a) 15. of the statutes is amended to read:
54	54	71.05 (6) (a) 15. The amount of the credits computed under s. 71.07 (2dm),
55	55	(2dx), (2dy), (3g), (3h), (3n), (3q), (3s), (3t), (3w), (3wm), (3y), (4k), (4n), (5e), (5i), (5j),
56	56	(5k), (5r), (5rm), (6n), and (10), and (11) and not passed through by a partnership,
57	57	limited liability company, or tax-option corporation that has added that amount to
58	58	the partnership's, company's, or tax-option corporation's income under s. 71.21 (4)
59	59	or 71.34 (1k) (g).
60	60	SECTION 2. 71.05 (6) (b) 57. of the statutes is created to read:
61	61	71.05 (6) (b) 57. a. For taxable years beginning after December 31, 2023, to the
62	62	extent otherwise included in Wisconsin taxable income if not for this subdivision, the
63	63	amount of the capital gain as computed under the Internal Revenue Code from the
64	64	transfer of ownership of a business in this state to an employee stock ownership plan,
65	65	a worker-owned cooperative, or an employee ownership trust.
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81	81	SECTION 2
82	82	ASSEMBLY BILL 1217
83	83	b. No modification may be claimed under this subdivision unless an employee
84	84	stock ownership plan, worker-owned cooperative, or employee ownership trust owns
85	85	more than 50 percent of the business whose transfer results in a capital gain
86	86	described in subd. 57. a.
87	87	c. No modification may be claimed for a taxable year under this subdivision
88	88	unless the business whose transfer results in a capital gain described in subd. 57. a.
89	89	has entered a labor peace agreement, as defined in s. 238.309 (1) (d), with the labor
90	90	organization representing the employees of the business for the taxable year.
91	91	d. In this subdivision, “employee ownership trust” has the meaning given in s.
92	92	238.309 (1) (b).
93	93	e. In this subdivision, “employee stock ownership plan” has the meaning given
94	94	in 26 USC 4975 (e) (7).
95	95	f. In this subdivision, “worker-owned cooperative” has the meaning given for
96	96	“eligible worker-owned cooperative” in 26 USC 1042 (c) (2).
97	97	SECTION 3. 71.07 (11) of the statutes is created to read:
98	98	71.07 (11) EMPLOYEE OWNERSHIP CONVERSION COSTS CREDIT. (a) Definitions. In
99	99	this subsection:
100	100	1. “Claimant” means a person that owns an interest in a qualified business
101	101	prior to its conversion to a employee ownership trust, employee stock ownership
102	102	plan, or worker-owned cooperative and that files a claim under this subsection.
103	103	2. “Conversion costs” has the meaning given in s. 238.309 (1) (a).
104	104	3. “Employee ownership trust” has the meaning given in s. 238.309 (1) (b).
105	105	4. “Employee stock ownership plan” has the meaning given in 26 USC 4975 (e)
106	106	(7).
107	107	5. “Qualified business” has the meaning given in s. 238.309 (1) (e).
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133	133	MDE&KP:cdc
134	134	SECTION 3 ASSEMBLY BILL 1217
135	135	6. “Worker-owned cooperative” has the meaning given for “eligible
136	136	worker-owned cooperative” in 26 USC 1042 (c) (2).
137	137	(b) Filing claims. For taxable years beginning after December 31, 2023, and
138	138	subject to the limitations provided in this subsection, a claimant may claim as a
139	139	credit against the tax imposed under s. 71.02 for the taxable year during which a
140	140	conversion to a employee ownership trust, employee stock ownership plan, or
141	141	worker-owned cooperative is complete, up to the amount of those taxes, all of the
142	142	following:
143	143	1. An amount equal to 70 percent of the conversion costs, up to $100,000,
144	144	incurred by a qualified business for converting to a worker-owned cooperative.
145	145	2. An amount equal to 50 percent of the conversion costs, up to $100,000,
146	146	incurred by a qualified business for converting to an employee ownership trust or an
147	147	employee stock ownership plan.
148	148	(c) Limitations. 1. No credit is allowed under this subsection for a taxable year
149	149	if the qualified business has not entered into a labor peace agreement, as defined in
150	150	s. 238.309 (1) (d), with the labor organization representing the employees of the
151	151	business for the taxable year.
152	152	2. No credit may be allowed under this subsection unless the claimant files an
153	153	application with the Wisconsin Economic Development Corporation, at the time and
154	154	in the manner prescribed by the Wisconsin Economic Development Corporation, and
155	155	the Wisconsin Economic Development Corporation approves the application. The
156	156	claimant shall submit a copy of the certification under s. 238.309 (3) with the
157	157	claimant's return.
158	158	3. Partnerships, limited liability companies, and tax-option corporations may
159	159	not claim the credit under this subsection, but the eligibility for and the amount of
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186	186	MDE&KP:cdc
187	187	SECTION 3
188	188	ASSEMBLY BILL 1217
189	189	the credit are based on the amounts paid by the entities under par. (b). A
190	190	partnership, limited liability company, or tax-option corporation shall compute the
191	191	amount of the credit that each of its partners, members, or shareholders may claim
192	192	and shall provide that information to each of them. Partners, members, and
193	193	shareholders may claim the credit in proportion to their ownership interests.
194	194	(d) Administration. Section 71.28 (4) (e) to (h), as it applies to the credit under
195	195	s. 71.28 (4), applies to the credit under this subsection.
196	196	SECTION 4. 71.10 (4) (em) of the statutes is created to read:
197	197	71.10 (4) (em) Employee ownership conversion costs credit under s. 71.07 (11).
198	198	SECTION 5. 71.21 (4) (a) of the statutes is amended to read:
199	199	71.21 (4) (a) The amount of the credits computed by a partnership under s.
200	200	71.07 (2dm), (2dx), (2dy), (3g), (3h), (3n), (3q), (3s), (3t), (3w), (3wm), (3y), (4k), (4n),
201	201	(5e), (5g), (5i), (5j), (5k), (5r), (5rm), (6n), and (10), and (11) and passed through to
202	202	partners shall be added to the partnership's income.
203	203	SECTION 6. 71.26 (1) (j) of the statutes is created to read:
204	204	71.26 (1) (j) Capital gain from transfer of business to employee ownership. 1.
205	205	The amount of the capital gain as computed under the Internal Revenue Code from
206	206	the transfer of ownership of a business in this state to an employee stock ownership
207	207	plan, a worker-owned cooperative, or an employee ownership trust.
208	208	2. The exemption under this paragraph does not apply unless an employee
209	209	stock ownership plan, worker-owned cooperative, or employee ownership trust owns
210	210	more than 50 percent of the business whose transfer results in a capital gain
211	211	described in subd. 1.
212	212	3. The exemption under this paragraph does not apply for a taxable year unless
213	213	the business whose transfer results in a capital gain described in subd. 1. has entered
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239	239	MDE&KP:cdc
240	240	SECTION 6 ASSEMBLY BILL 1217
241	241	a labor peace agreement, as defined in s. 238.309 (1) (d), with the labor organization
242	242	representing the employees of the business for the taxable year.
243	243	4. In this paragraph, “employee ownership trust” has the meaning given in s.
244	244	238.309 (1) (b).
245	245	5. In this paragraph, “employee stock ownership plan” has the meaning given
246	246	in 26 USC 4975 (e) (7).
247	247	6. In this paragraph, “worker-owned cooperative” has the meaning given for
248	248	“eligible worker-owned cooperative” in 26 USC 1042 (c) (2).
249	249	SECTION 7. 71.26 (2) (a) 4. of the statutes is amended to read:
250	250	71.26 (2) (a) 4. Plus the amount of the credit computed under s. 71.28 (1dm),
251	251	(1dx), (1dy), (3g), (3h), (3n), (3q), (3t), (3w), (3wm), (3y), (5e), (5g), (5i), (5j), (5k), (5r),
252	252	(5rm), (6n), and (10), and (11) and not passed through by a partnership, limited
253	253	liability company, or tax-option corporation that has added that amount to the
254	254	partnership's, limited liability company's, or tax-option corporation's income under
255	255	s. 71.21 (4) or 71.34 (1k) (g).
256	256	SECTION 8. 71.28 (11) of the statutes is created to read:
257	257	71.28 (11) EMPLOYEE OWNERSHIP CONVERSION COSTS CREDIT. (a) Definitions. In
258	258	this subsection:
259	259	1. “Claimant” means a person that owns an interest in a qualified business
260	260	prior to its conversion to a employee ownership trust, employee stock ownership
261	261	plan, or worker-owned cooperative and that files a claim under this subsection.
262	262	2. “Conversion costs” has the meaning given in s. 238.309 (1) (a).
263	263	3. “Employee ownership trust” has the meaning given in s. 238.309 (1) (b).
264	264	4. “Employee stock ownership plan” has the meaning given in 26 USC 4975 (e)
265	265	(7).
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293	293	SECTION 8
294	294	ASSEMBLY BILL 1217
295	295	5. “Qualified business” has the meaning given in s. 238.309 (1) (e).
296	296	6. “Worker-owned cooperative” has the meaning given for “eligible
297	297	worker-owned cooperative” in 26 USC 1042 (c) (2).
298	298	(b) Filing claims. For taxable years beginning after December 31, 2023, and
299	299	subject to the limitations provided in this subsection, a claimant may claim as a
300	300	credit against the tax imposed under s. 71.23 for the taxable year during which a
301	301	conversion to a employee ownership trust, employee stock ownership plan, or
302	302	worker-owned cooperative is complete, up to the amount of those taxes, all of the
303	303	following:
304	304	1. An amount equal to 70 percent of the conversion costs, up to $100,000,
305	305	incurred by a qualified business for converting to a worker-owned cooperative.
306	306	2. An amount equal to 50 percent of the conversion costs, up to $100,000,
307	307	incurred by a qualified business for converting to an employee ownership trust or an
308	308	employee stock ownership plan.
309	309	(c) Limitations. 1. No credit is allowed under this subsection for a taxable year
310	310	if the qualified business has not entered into a labor peace agreement, as defined in
311	311	s. 238.309 (1) (d), with the labor organization representing the employees of the
312	312	business for the taxable year.
313	313	2. No credit may be allowed under this subsection unless the claimant files an
314	314	application with the Wisconsin Economic Development Corporation, at the time and
315	315	in the manner prescribed by the Wisconsin Economic Development Corporation, and
316	316	the Wisconsin Economic Development Corporation approves the application. The
317	317	claimant shall submit a copy of the certification under s. 238.309 (3) with the
318	318	claimant's return.
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344	344	SECTION 8 ASSEMBLY BILL 1217
345	345	3. Partnerships, limited liability companies, and tax-option corporations may
346	346	not claim the credit under this subsection, but the eligibility for and the amount of
347	347	the credit are based on the amounts paid by the entities under par. (b). A
348	348	partnership, limited liability company, or tax-option corporation shall compute the
349	349	amount of the credit that each of its partners, members, or shareholders may claim
350	350	and shall provide that information to each of them. Partners, members, and
351	351	shareholders may claim the credit in proportion to their ownership interests.
352	352	(d) Administration. Subsection (4) (e) to (h), as it applies to the credit under
353	353	sub. (4), applies to the credit under this subsection.
354	354	SECTION 9. 71.30 (3) (am) of the statutes is created to read:
355	355	71.30 (3) (am) Employee ownership conversion costs credit under s. 71.28 (11).
356	356	SECTION 10. 71.34 (1k) (g) of the statutes is amended to read:
357	357	71.34 (1k) (g) An addition shall be made for credits computed by a tax-option
358	358	corporation under s. 71.28 (1dm), (1dx), (1dy), (3), (3g), (3h), (3n), (3q), (3t), (3w),
359	359	(3wm), (3y), (4), (5), (5e), (5g), (5i), (5j), (5k), (5r), (5rm), (6n), and (10), and (11) and
360	360	passed through to shareholders.
361	361	SECTION 11. 71.45 (1) (e) of the statutes is created to read:
362	362	71.45 (1) (e) 1. The amount of the capital gain as computed under the Internal
363	363	Revenue Code from the transfer of ownership of a business in this state to an
364	364	employee stock ownership plan, a worker-owned cooperative, or an employee
365	365	ownership trust.
366	366	2. The exemption under this paragraph does not apply unless an employee
367	367	stock ownership plan, worker-owned cooperative, or employee ownership trust owns
368	368	more than 50 percent of the business whose transfer results in a capital gain
369	369	described in subd. 1.
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397	397	SECTION 11
398	398	ASSEMBLY BILL 1217
399	399	3. The exemption under this paragraph does not apply for a taxable year unless
400	400	the business whose transfer results in a capital gain described in subd. 1. has entered
401	401	a labor peace agreement, as defined in s. 238.309 (1) (d), with the labor organization
402	402	representing the employees of the business for the taxable year.
403	403	4. In this paragraph, “employee ownership trust” has the meaning given in s.
404	404	238.309 (1) (b).
405	405	5. In this paragraph, “employee stock ownership plan” has the meaning given
406	406	in 26 USC 4975 (e) (7).
407	407	6. In this paragraph, “worker-owned cooperative” has the meaning given for
408	408	“eligible worker-owned cooperative” in 26 USC 1042 (c) (2).
409	409	SECTION 12. 71.45 (2) (a) 10. of the statutes is amended to read:
410	410	71.45 (2) (a) 10. By adding to federal taxable income the amount of credit
411	411	computed under s. 71.47 (1dm) to (1dy), (3g), (3h), (3n), (3q), (3w), (3y), (5e), (5g), (5i),
412	412	(5j), (5k), (5r), (5rm), (6n), and (10), and (11) and not passed through by a partnership,
413	413	limited liability company, or tax-option corporation that has added that amount to
414	414	the partnership's, limited liability company's, or tax-option corporation's income
415	415	under s. 71.21 (4) or 71.34 (1k) (g) and the amount of credit computed under s. 71.47
416	416	(3), (3t), (4), (4m), and (5).
417	417	SECTION 13. 71.47 (11) of the statutes is created to read:
418	418	71.47 (11) EMPLOYEE OWNERSHIP CONVERSION COSTS CREDIT. (a) Definitions. In
419	419	this subsection:
420	420	1. “Claimant” means a person that owns an interest in a qualified business
421	421	prior to its conversion to a employee ownership trust, employee stock ownership
422	422	plan, or worker-owned cooperative and that files a claim under this subsection.
423	423	2. “Conversion costs” has the meaning given in s. 238.309 (1) (a).
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449	449	MDE&KP:cdc
450	450	SECTION 13 ASSEMBLY BILL 1217
451	451	3. “Employee ownership trust” has the meaning given in s. 238.309 (1) (b).
452	452	4. “Employee stock ownership plan” has the meaning given in 26 USC 4975 (e)
453	453	(7).
454	454	5. “Qualified business” has the meaning given in s. 238.309 (1) (e).
455	455	6. “Worker-owned cooperative” has the meaning given for “eligible
456	456	worker-owned cooperative” in 26 USC 1042 (c) (2).
457	457	(b) Filing claims. For taxable years beginning after December 31, 2023, and
458	458	subject to the limitations provided in this subsection, a claimant may claim as a
459	459	credit against the tax imposed under s. 71.43 for the taxable year during which a
460	460	conversion to a employee ownership trust, employee stock ownership plan, or
461	461	worker-owned cooperative is complete, up to the amount of those taxes, all of the
462	462	following:
463	463	1. An amount equal to 70 percent of the conversion costs, up to $100,000,
464	464	incurred by a qualified business for converting to a worker-owned cooperative.
465	465	2. An amount equal to 50 percent of the conversion costs, up to $100,000,
466	466	incurred by a qualified business for converting to an employee ownership trust or an
467	467	employee stock ownership plan.
468	468	(c) Limitations. 1. No credit is allowed under this subsection for a taxable year
469	469	if the qualified business has not entered into a labor peace agreement, as defined in
470	470	s. 238.309 (1) (d), with the labor organization representing the employees of the
471	471	business for the taxable year.
472	472	2. No credit may be allowed under this subsection unless the claimant files an
473	473	application with the Wisconsin Economic Development Corporation, at the time and
474	474	in the manner prescribed by the Wisconsin Economic Development Corporation, and
475	475	the Wisconsin Economic Development Corporation approves the application. The
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502	502	MDE&KP:cdc
503	503	SECTION 13
504	504	ASSEMBLY BILL 1217
505	505	claimant shall submit a copy of the certification under s. 238.309 (3) with the
506	506	claimant's return.
507	507	3. Partnerships, limited liability companies, and tax-option corporations may
508	508	not claim the credit under this subsection, but the eligibility for and the amount of
509	509	the credit are based on the amounts paid by the entities under par. (b). A
510	510	partnership, limited liability company, or tax-option corporation shall compute the
511	511	amount of the credit that each of its partners, members, or shareholders may claim
512	512	and shall provide that information to each of them. Partners, members, and
513	513	shareholders may claim the credit in proportion to their ownership interests.
514	514	(d) Administration. Section 71.28 (4) (e) to (h), as it applies to the credit under
515	515	s. 71.28 (4), applies to the credit under this subsection.
516	516	SECTION 14. 71.49 (1) (am) of the statutes is created to read:
517	517	71.49 (1) (am) Employee ownership conversion costs credit under s. 71.47 (11).
518	518	SECTION 15. 238.12 (1) of the statutes is amended to read:
519	519	238.12 (1) In this section, “tax benefits" means the credits under ss. 71.07
520	520	(2dm), (2dx), (3g), (3t), and (3wm), and (11), 71.28 (1dm), (1dx), (3g), (3t), and (3wm),
521	521	and (11), 71.47 (1dm), (1dx), (3g), and (3t), and (11), and 76.636.
522	522	SECTION 16. 238.309 of the statutes is created to read:
523	523	238.309 Employee ownership conversion costs tax credit. (1)
524	524	DEFINITIONS. (a) “Conversion costs” means professional services, including
525	525	accounting, legal, and business advisory services, for any of the following:
526	526	1. A feasibility study or other preliminary assessments regarding a transition
527	527	of a business to an employee stock ownership plan, a worker-owned cooperative, or
528	528	an employee ownership trust.
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554	554	SECTION 16 ASSEMBLY BILL 1217
555	555	2. The transition of a business to an employee stock ownership plan, a
556	556	worker-owned cooperative, or an employee ownership trust.
557	557	(b) “Employee ownership trust” means an indirect form of employee ownership
558	558	in which a trust holds a controlling stake in a qualified business and benefits all
559	559	employees on an equal basis.
560	560	(c) “Employee stock ownership plan” has the same meaning as in 26 USC 4975
561	561	(e) (7).
562	562	(d) “Labor peace agreement” means an agreement between an applicant under
563	563	this section and a labor organization, as defined in s. 5.02 (8m), that does all of the
564	564	following:
565	565	1. Prohibits labor organizations and its members from engaging in picketing,
566	566	work stoppages, boycotts, and any other economic interference with persons doing
567	567	business in this state.
568	568	2. Prohibits the applicant from disrupting the efforts of the labor organization
569	569	to communicate with and to organize and represent the applicant's employees.
570	570	3. Provides the labor organization access at reasonable times to areas in which
571	571	the applicant's employees work for the purpose of meeting with employees to discuss
572	572	their right to representation, employment rights under state law, and terms and
573	573	conditions of employment.
574	574	(e) “Qualified business” means a person eligible to receive tax benefits under
575	575	this section.
576	576	(f) “Worker-owned cooperative” has the meaning given for “eligible
577	577	worker-owned cooperative” in 26 USC 1042 (c) (2).
578	578	(2) ELIGIBILITY. An applicant for tax benefits under this section is eligible for
579	579	certification under sub. (3) if all of the following apply:
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607	607	SECTION 16
608	608	ASSEMBLY BILL 1217
609	609	(a) The applicant is a business subject to taxes under ch. 71.
610	610	(b) The applicant is not owned in whole or in part by an employee ownership
611	611	trust, does not have an employee stock ownership plan, and is not, in whole or in part,
612	612	a worker-owned cooperative.
613	613	(c) The applicant has entered into a labor peace agreement.
614	614	(3) CERTIFICATION. The corporation may certify a qualified business to claim
615	615	tax benefits as follows:
616	616	(a) An amount, not to exceed $100,000, equal to up to 70 percent of conversion
617	617	costs related to converting a qualified business to a worker cooperation, not to exceed
618	618	$100,000.
619	619	(b) An amount, not to exceed $100,000, equal to up to 50 percent of conversion
620	620	costs related to converting a qualified business to an employee ownership trust or an
621	621	employee stock ownership plan.
622	622	(4) LIMIT. The corporation may allocate up to $5,000,000 in tax benefits under
623	623	this section each year. Any unused allocation may be carried forward.
624	624	(5) POLICIES AND PROCEDURES. The corporation shall establish policies and
625	625	procedures for the operation of this section.
626	626	SECTION 17.0Initial applicability.
627	627	(1) CAPITAL GAIN EXCLUSION. The treatment of ss. 71.26 (1) (j) and 71.45 (1) (e)
628	628	first applies to taxable years beginning on January 1, 2024.
629	629	(END)
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