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2025 SENATE BILL 21
February 5, 2025 - Introduced by Senators JAMES, LARSON and TOMCZYK,
cosponsored by Representatives SORTWELL, FRANKLIN, KAUFERT, MADISON,
ANDERSON, CLANCY, CRUZ, DESMIDT, GOEBEN, GOODWIN, GUNDRUM, HONG,
HYSELL, KREIBICH, MAXEY, MIRESSE, NOVAK, PIWOWARCZYK, PRADO, STROUD,
TUSLER, UDELL and WICHGERS. Referred to Committee on Agriculture and
Revenue.
AN ACT to amend 71.05 (6) (a) 15., 71.21 (4) (a), 71.26 (2) (a) 4., 71.34 (1k) (g)
and 71.45 (2) (a) 10.; to create 71.05 (6) (b) 57., 71.07 (12), 71.10 (4) (em),
71.26 (2) (a) 13., 71.28 (12), 71.30 (3) (am), 71.45 (2) (a) 25., 71.47 (12), 71.49
(1) (am), 73.03 (78) and 73.03 (79) of the statutes; relating to: creating an
employee ownership conversion costs tax credit, a deduction for capital gains
from the transfer of a business to employee ownership, and an employee
ownership education and outreach program.
Analysis by the Legislative Reference Bureau
This bill creates tax incentives related to businesses in this state converting to
an employee ownership business structure and requires the Department of
Revenue to establish an outreach and education program to promote employee
ownership business structures.
Employee ownership conversion costs tax credit
Under the bill, DOR 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
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converting the business to 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, does not have an employee stock ownership plan
and is not, in whole or in part, a worker-owned cooperative.
Capital gain deduction
The bill also creates an individual income tax subtraction and a corporate
income and franchise tax deduction 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 or worker-owned cooperative.
Employee ownership outreach and education
Finally, the bill directs DOR to establish an economic development program
for the purpose of promoting employee ownership business structures, including the
business structures of employee stock ownership plans and worker-owned
cooperatives, through education, outreach, technical assistance, and training
related to converting existing businesses to an employee ownership business
structure or starting new businesses with an employee ownership business
structure. The bill directs DOR to submit an application to the U.S. secretary of
labor for a grant under 29 USC 3228 for use in administering the program created
in the bill.
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:
SECTION 1. 71.05 (6) (a) 15. of the statutes is amended to read:
71.05 (6) (a) 15. The amount of the credits computed under s. 71.07 (2dm),
(2dx), (2dy), (3g), (3h), (3n), (3q), (3s), (3t), (3w), (3wm), (3y), (4k), (4n), (5i), (5j), (5k),
(5r), (5rm), (6n), and (10), and (12) and not passed through by a partnership, limited
liability company, or tax-option corporation that has added that amount to the
partnership[s, company[s, or tax-option corporation[s income under s. 71.21 (4) or
71.34 (1k) (g).
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SECTION 2
SECTION 2. 71.05 (6) (b) 57. of the statutes is created to read:
71.05 (6) (b) 57. a. For taxable years beginning after December 31, 2024, to
the extent otherwise included in Wisconsin taxable income if not for this
subdivision, the amount of the capital gain as computed under the Internal
Revenue Code from the transfer of ownership of a business in this state to an
employee stock ownership plan or a worker-owned cooperative.
b. No modification may be claimed under this subdivision unless an employee
stock ownership plan or worker-owned cooperative owns more than 50 percent of the
business whose transfer results in a capital gain described in subd. 57. a.
c. In this subdivision, Xemployee stock ownership planY has the meaning given
in 26 USC 4975 (e) (7).
d. In this subdivision, Xworker-owned cooperativeY has the meaning given for
Xeligible worker-owned cooperativeY in 26 USC 1042 (c) (2).
SECTION 3. 71.07 (12) of the statutes is created to read:
71.07 (12) EMPLOYEE OWNERSHIP CONVERSION COSTS CREDIT. (a) Definitions.
In this subsection:
1. XClaimantY means a person that owns an interest in a qualified business
prior to its conversion to an employee stock ownership plan or worker-owned
cooperative and that files a claim under this subsection.
2. XConversion costsY has the meaning given in s. 73.03 (79) (b) 1.
3. XEmployee stock ownership planY has the meaning given in 26 USC 4975 (e)
(7).
4. XQualified businessY has the meaning given in s. 73.03 (79) (b) 3.
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5. XWorker-owned cooperativeY has the meaning given for Xeligible worker-
owned cooperativeY in 26 USC 1042 (c) (2).
(b) Filing claims. For taxable years beginning after December 31, 2024, and
subject to the limitations provided in this subsection, a claimant may claim as a
credit against the tax imposed under s. 71.02 for the taxable year during which a
conversion to an employee stock ownership plan or a worker-owned cooperative is
complete, up to the amount of those taxes, all of the following:
1. An amount equal to 70 percent of the conversion costs, up to $100,000,
incurred by a qualified business for converting to a worker-owned cooperative.
2. An amount equal to 50 percent of the conversion costs, up to $100,000,
incurred by a qualified business for converting to an employee stock ownership
plan.
(c) Limitations. 1. No credit may be allowed under this subsection unless the
claimant files an application with the department, at the time and in the manner
prescribed by the department, and the department approves the application. The
claimant shall submit a copy of the certification under s. 73.03 (79) (a) 3. with the
claimant[s return.
2. Partnerships, limited liability companies, and tax-option corporations may
not claim the credit under this subsection, but the eligibility for and the amount of
the credit are based on the amounts paid by the entities under par. (b). A
partnership, limited liability company, or tax-option corporation shall compute the
amount of the credit that each of its partners, members, or shareholders may claim
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and shall provide that information to each of them. Partners, members, and
shareholders may claim the credit in proportion to their ownership interests.
(d) Administration. Section 71.28 (4) (e) to (h), as it applies to the credit under
s. 71.28 (4), applies to the credit under this subsection.
SECTION 4. 71.10 (4) (em) of the statutes is created to read:
71.10 (4) (em) Employee ownership conversion costs credit under s. 71.07 (12).
SECTION 5. 71.21 (4) (a) of the statutes is amended to read:
71.21 (4) (a) The amount of the credits computed by a partnership under s.
71.07 (2dm), (2dx), (2dy), (3g), (3h), (3n), (3q), (3s), (3t), (3w), (3wm), (3y), (4k), (4n),
(5g), (5i), (5j), (5k), (5r), (5rm), (6n), and (10), and (12) and passed through to
partners shall be added to the partnership[s income.
SECTION 6. 71.26 (2) (a) 4. of the statutes is amended to read:
71.26 (2) (a) 4. Plus the amount of the credit computed under s. 71.28 (1dm),
(1dx), (1dy), (3g), (3h), (3n), (3q), (3t), (3w), (3wm), (3y), (5g), (5i), (5j), (5k), (5r),
(5rm), (6n), and (10), and (12) and not passed through by a partnership, limited
liability company, or tax-option corporation that has added that amount to the
partnership[s, limited liability company[s, or tax-option corporation[s income under
s. 71.21 (4) or 71.34 (1k) (g).
SECTION 7. 71.26 (2) (a) 13. of the statutes is created to read:
71.26 (2) (a) 13. a. Minus the amount of the capital gain as computed under
the Internal Revenue Code, to the extent included in federal taxable income, from
the transfer of ownership of a business in this state to an employee stock ownership
plan or a worker-owned cooperative.
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b. The deduction under this subdivision does not apply unless an employee
stock ownership plan or worker-owned cooperative owns more than 50 percent of the
business whose transfer results in a capital gain described in subd. 13. a.
c. In this subdivision, Xemployee stock ownership planY has the meaning given
in 26 USC 4975 (e) (7).
d. In this subdivision, Xworker-owned cooperativeY has the meaning given for
Xeligible worker-owned cooperativeY in 26 USC 1042 (c) (2).
SECTION 8. 71.28 (12) of the statutes is created to read:
71.28 (12) EMPLOYEE OWNERSHIP CONVERSION COSTS CREDIT. (a) Definitions.
In this subsection:
1. XClaimantY means a person that owns an interest in a qualified business
prior to its conversion to an employee stock ownership plan or worker-owned
cooperative and that files a claim under this subsection.
2. XConversion costsY has the meaning given in s. 73.03 (79) (b) 1.
3. XEmployee stock ownership planY has the meaning given in 26 USC 4975 (e)
(7).
4. XQualified businessY has the meaning given in s. 73.03 (79) (b) 3.
5. XWorker-owned cooperativeY has the meaning given for Xeligible worker-
owned cooperativeY in 26 USC 1042 (c) (2).
(b) Filing claims. For taxable years beginning after December 31, 2024, and
subject to the limitations provided in this subsection, a claimant may claim as a
credit against the tax imposed under s. 71.23 for the taxable year during which a
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conversion to an employee stock ownership plan or worker-owned cooperative is
complete, up to the amount of those taxes, all of the following:
1. An amount equal to 70 percent of the conversion costs, up to $100,000,
incurred by a qualified business for converting to a worker-owned cooperative.
2. An amount equal to 50 percent of the conversion costs, up to $100,000,
incurred by a qualified business for converting to an employee stock ownership
plan.
(c) Limitations. 1. No credit may be allowed under this subsection unless the
claimant files an application with the department, at the time and in the manner
prescribed by the department, and the department approves the application. The
claimant shall submit a copy of the certification under s. 73.03 (79) (a) 3. with the
claimant[s return.
2. Partnerships, limited liability companies, and tax-option corporations may
not claim the credit under this subsection, but the eligibility for and the amount of
the credit are based on the amounts paid by the entities under par. (b). A
partnership, limited liability company, or tax-option corporation shall compute the
amount of the credit that each of its partners, members, or shareholders may claim
and shall provide that information to each of them. Partners, members, and
shareholders may claim the credit in proportion to their ownership interests.
(d) Administration. Subsection (4) (e) to (h), as it applies to the credit under
sub. (4), applies to the credit under this subsection.
SECTION 9. 71.30 (3) (am) of the statutes is created to read:
71.30 (3) (am) Employee ownership conversion costs credit under s. 71.28 (12).
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SECTION 10
SECTION 10. 71.34 (1k) (g) of the statutes is amended to read:
71.34 (1k) (g) An addition shall be made for credits computed by a tax-option
corporation under s. 71.28 (1dm), (1dx), (1dy), (3), (3g), (3h), (3n), (3q), (3t), (3w),
(3wm), (3y), (4), (5), (5g), (5i), (5j), (5k), (5r), (5rm), (6n), and (10), and (12) and
passed through to shareholders.
SECTION 11. 71.45 (2) (a) 10. of the statutes is amended to read:
71.45 (2) (a) 10. By adding to federal taxable income the amount of credit
computed under s. 71.47 (1dm) to (1dy), (3g), (3h), (3n), (3q), (3w), (3y), (5g), (5i),
(5j), (5k), (5r), (5rm), (6n), and (10), and (12) and not passed through by a
partnership, limited liability company, or tax-option corporation that has added
that amount to the partnership[s, limited liability company[s, or tax-option
corporation[s income under s. 71.21 (4) or 71.34 (1k) (g) and the amount of credit
computed under s. 71.47 (3), (3t), (4), (4m), and (5).
SECTION 12. 71.45 (2) (a) 25. of the statutes is created to read:
71.45 (2) (a) 25. a. By subtracting from federal taxable income, to the extent
included in federal taxable income, the amount of the capital gain as computed
under the Internal Revenue Code from the transfer of ownership of a business in
this state to an employee stock ownership plan or a worker-owned cooperative.
b. The deduction under this subdivision does not apply unless an employee
stock ownership plan or worker-owned cooperative owns more than 50 percent of the
business whose transfer results in a capital gain described in subd. 25. a.
c. In this subdivision, Xemployee stock ownership planY has the meaning given
in 26 USC 4975 (e) (7).
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d. In this subdivision, Xworker-owned cooperativeY has the meaning given for
Xeligible worker-owned cooperativeY in 26 USC 1042 (c) (2).
SECTION 13. 71.47 (12) of the statutes is created to read:
71.47 (12) EMPLOYEE OWNERSHIP CONVERSION COSTS CREDIT. (a) Definitions.
In this subsection:
1. XClaimantY means a person that owns an interest in a qualified business
prior to its conversion to an employee stock ownership plan or worker-owned
cooperative and that files a claim under this subsection.
2. XConversion costsY has the meaning given in s. 73.03 (79) (b) 1.
3. XEmployee stock ownership planY has the meaning given in 26 USC 4975 (e)
(7).
4. XQualified businessY has the meaning given in s. 73.03 (79) (b) 3.
5. XWorker-owned cooperativeY has the meaning given for Xeligible worker-
owned cooperativeY in 26 USC 1042 (c) (2).
(b) Filing claims. For taxable years beginning after December 31, 2024, and
subject to the limitations provided in this subsection, a claimant may claim as a
credit against the tax imposed under s. 71.43 for the taxable year during which a
conversion to an employee stock ownership plan or worker-owned cooperative is
complete, up to the amount of those taxes, all of the following:
1. An amount equal to 70 percent of the conversion costs, up to $100,000,
incurred by a qualified business for converting to a worker-owned cooperative.
2. An amount equal to 50 percent of the conversion costs, up to $100,000,
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incurred by a qualified business for converting to an employee stock ownership
plan.
(c) Limitations. 1. No credit may be allowed under this subsection unless the
claimant files an application with the department, at the time and in the manner
prescribed by the department, and the department approves the application. The
claimant shall submit a copy of the certification under s. 73.03 (79) (a) 3. with the
claimant[s return.
2. Partnerships, limited liability companies, and tax-option corporations may
not claim the credit under this subsection, but the eligibility for and the amount of
the credit are based on the amounts paid by the entities under par. (b). A
partnership, limited liability company, or tax-option corporation shall compute the
amount of the credit that each of its partners, members, or shareholders may claim
and shall provide that information to each of them. Partners, members, and
shareholders may claim the credit in proportion to their ownership interests.
(d) Administration. Section 71.28 (4) (e) to (h), as it applies to the credit under
s. 71.28 (4), applies to the credit under this subsection.
SECTION 14. 71.49 (1) (am) of the statutes is created to read:
71.49 (1) (am) Employee ownership conversion costs credit under s. 71.47 (12).
SECTION 15. 73.03 (78) of the statutes is created to read:
73.03 (78) (a) To establish and administer an economic development program
for the purpose of doing all of the following:
1. Providing education and outreach to inform employees and employers about
the possibilities and benefits of employee ownership business structures and
succession planning, including providing information about financial education,
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employee teams, open-book management, and other tools that enable employees to
share ideas and information about how their businesses can succeed.
2. Providing technical assistance to assist employee efforts to become business
owners, to enable employers and employees to explore and assess the feasibility of
transferring full or partial ownership to employees, and to encourage employees
and employers to start new businesses with an employee ownership business
structure.
3. Training employees and employers with respect to methods of employee
participation in open-book management, work teams, committees, and other
approaches for seeking greater employee input.
4. Training other entities to establish programs and carry out program
activities designed to promote employee ownership business structures.
(b) The department may contract with a 3rd party to operate the program
under this subsection.
(c) Within one year after the effective date of this paragraph .... [LRB inserts
date], the department shall submit an application to the U.S. secretary of labor for
a grant under 29 USC 3228 for use in connection with the program under this
section.
(d) In this subsection:
1. XEmployee ownership business structureY includes the business structures
for employee stock ownership plans and worker-owned cooperatives.
2. XEmployee stock ownership planY has the same meaning as in 26 USC 4975
(e) (7).
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3. XWorker-owned cooperativeY has the meaning given for Xeligible worker-
owned cooperativeY in 26 USC 1042 (c) (2).
SECTION 16. 73.03 (79) of the statutes is created to read:
73.03 (79) (a) 1. To implement a program to approve applications for purposes
of ss. 71.07 (12), 71.28 (12), and 71.47 (12).
2. An applicant for a tax credit under s. 71.07 (12), 71.28 (12), or 71.47 (12) is
eligible for certification under subd. 3. if all of the following apply:
a. The applicant is a business subject to taxes under ch. 71.
b. The applicant does not have an employee stock ownership plan and is not,
in whole or in part, a worker-owned cooperative.
3. The department may certify a qualified business to claim a tax credit under
s. 71.07 (12), 71.28 (12), or 71.47 (12) as follows:
a. An amount, not to exceed $100,000, equal to up to 70 percent of conversion
costs related to converting a qualified business to a worker cooperation.
b. An amount, not to exceed $100,000, equal to up to 50 percent of conversion
costs related to converting a qualified business to an employee stock ownership
plan.
4. The department may allocate up to $5,000,000 in total credits under ss.
71.07 (12), 71.28 (12), and 71.47 (12) each year. Any unused allocation may be
carried forward.
(b) In this subsection:
1. XConversion costsY means professional services, including accounting,
legal, and business advisory services, for any of the following:
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a. A feasibility study or other preliminary assessments regarding a transition
of a business to an employee stock ownership plan or a worker-owned cooperative.
b. The transition of a business to an employee stock ownership plan or a
worker-owned cooperative.
2. XEmployee stock ownership planY has the same meaning as in 26 USC 4975
(e) (7).
3. XQualified businessY means a person that satisfies the criteria under par.
(a) 2.
4. XWorker-owned cooperativeY has the meaning given for Xeligible worker-
owned cooperativeY in 26 USC 1042 (c) (2).
SECTION 17. Initial applicability.
(1) CAPITAL GAIN SUBTRACTION. The treatment of ss. 71.26 (2) (a) 13. and
71.45 (2) (a) 25. first applies to taxable years beginning on January 1, 2025.
(END)
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