Second Regular Session
Seventy-fourth General Assembly
STATE OF COLORADO
INTRODUCED
LLS NO. 24-0715.01 Rebecca Bayetti x4348
HOUSE BILL 24-1157
House Committees Senate Committees
Business Affairs & Labor
A BILL FOR AN ACT
C
ONCERNING EMPLOYEE-OWNED BUSINESSES.101
Bill Summary
(Note: This summary applies to this bill as introduced and does
not reflect any amendments that may be subsequently adopted. If this bill
passes third reading in the house of introduction, a bill summary that
applies to the reengrossed version of this bill will be available at
http://leg.colorado.gov
.)
The bill creates the employee ownership office, which was
originally created administratively by the governor in 2020, as a statutory
entity within the office of economic development and international trade
(OEDIT). The bill also creates an income tax credit for specified costs
incurred by new employee-owned businesses, to be administered by the
employee ownership office.
HOUSE SPONSORSHIP
Lindstedt and Vigil,
SENATE SPONSORSHIP
Bridges,
Shading denotes HOUSE amendment. Double underlining denotes SENATE amendment.
Capital letters or bold & italic numbers indicate new material to be added to existing law.
Dashes through the words or numbers indicate deletions from existing law.
Be it enacted by the General Assembly of the State of Colorado:1
SECTION 1. Legislative declaration. (1) The general assembly2
finds and declares that:3
(a) The general assembly has demonstrated an ongoing4
commitment to ensuring that communities and local economies from5
across Colorado are provided with the opportunities and direct support6
they need to thrive, as well as recover from the COVID-19 pandemic;7
(b) The office of economic development and international trade8
develops and manages a wide range of programs dedicated to supporting9
the economic growth and development of businesses of all sizes, local10
economies in every corner of Colorado, and Colorado's statewide11
economy;12
(c) It is a priority of the general assembly to ensure that programs13
of the office of economic development and international trade are14
accessible and impactful in both rural and urban communities, ensuring15
that the entire state of Colorado can achieve and sustain a healthy16
economy that works for everyone and protects what makes Colorado the17
best state in the country in which to live, work, start a business, raise a18
family, and retire;19
(d) In 2020, the governor administratively created the employee20
ownership office within the office of economic development and21
international trade to ensure that, as people reach retirement age and22
business owners consider what to do with their businesses, communities23
can retain homegrown economic opportunities through employee24
ownership models;25
(e) The employee ownership office allows Colorado to retain26
business development within communities instead of exporting27
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entrepreneurship; and1
(f) Since the formation of the employee ownership office under2
the business support division within the office of economic development3
and international trade, it has:4
(I) Built critical individual connections with Colorado's small5
businesses and provided one-to-one consulting support and financial6
support of off-setting the costs associated with transitioning into an7
employee ownership model;8
(II) Coordinated with other state and federal partners to provide9
a holistic approach to meeting community needs; and10
(III) Provided feedback to improve internal programs and inform11
the development of new initiatives, high-level policy decisions, and12
legislation that influences rural economic development statewide.13
SECTION 2. In Colorado Revised Statutes, add 24-48.5-135 as14
follows:15
24-48.5-135. Employee ownership office - creation - duties.16
(1) T
HE EMPLOYEE OWNERSHIP OFFICE IS CREATED WITHIN THE OFFICE OF17
ECONOMIC DEVELOPMENT. THE DIRECTOR OF THE OFFICE OF ECONOMIC18
DEVELOPMENT DESIGNATES AND SUPERVISES THE DIRECTOR OF THE19
EMPLOYEE OWNERSHIP OFFICE.20
(2) T
HE EMPLOYEE OWNERSHIP OFFICE SHALL:21
(a) S
UPPORT THE DEVELOPMENT AND ADVANCEMENT OF22
EMPLOYEE-OWNED BUSINESSES, ESPECIALLY BY PROVIDING TECHNICAL23
SUPPORT TO SMALL BUSINESS OWNERS LOOKING TO TRANSITION INTO24
EMPLOYEE OWNERSHIP MODELS THROUGH THE OFFICE OF ECONOMIC25
DEVELOPMENT;26
(b) P
ROVIDE SUPPORT AND COORDINATION WITH OTHER STATE27
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AGENCIES AND PROGRAMS THAT DEAL WITH EMPLOYEE OWNERSHIP1
MATTERS; AND2
(c) M
EASURE THE SUCCESS OF PROGRAM OUTREACH AND CONDUCT3
RESEARCH TO DETERMINE WHETHER COLORADO'S SMALL BUSINESS4
OWNERS EXPERIENCE INCREASED GROWTH, STABILITY, OR VIABILITY OF5
THEIR BUSINESSES AND ADDITIONAL EMPLOYEE ENGAGEMENT IN6
EMPLOYEE OWNERSHIP STRUCTURES AS A RESULT OF THE EFFORTS OF THE7
EMPLOYEE OWNERSHIP OFFICE.8
SECTION 3. In Colorado Revised Statutes, add 39-22-542.5 as9
follows:10
39-22-542.5. Tax credit for new employee-owned businesses11
- tax preference performance statement - legislative declaration -12
definitions - repeal. (1) Tax preference performance statement.13
(a) I
N ACCORDANCE WITH SECTION 39-21-304, WHICH REQUIRES EACH14
BILL THAT CREATES A NEW TAX EXPENDITURE TO INCLUDE A TAX15
PREFERENCE PERFORMANCE STATEMENT AS PART OF A STATUTORY16
LEGISLATIVE DECLARATION, THE GENERAL ASSEMBLY FINDS AND17
DECLARES THAT THE PURPOSES OF THE TAX CREDIT CREATED IN THIS18
SECTION ARE TO INDUCE CERTAIN DESIGNATED BEHAVIOR BY TAXPAYERS,19
TO CREATE OR RETAIN JOBS, AND TO PROVIDE INCOME TAX RELIEF FOR20
CERTAIN BUSINESSES OR INDIVIDUALS. SPECIFICALLY, THE TAX CREDIT21
FACILITATES EMPLOYEE OWNERSHIP AND THE RETENTION OF COMMUNITY22
INVESTMENT AND WEALTH BY BUSINESS OWNERS AND EMPLOYEES IN A23
COMMUNITY.24
(b) T
HE GENERAL ASSEMBLY AND THE STATE AUDITOR SHALL25
MEASURE THE EFFECTIVENESS OF THE TAX CREDIT IN ACHIEVING THE26
PURPOSES SPECIFIED IN SUBSECTION (1)(a) OF THIS SECTION BASED ON THE27
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INFORMATION REQUIRED TO BE MAINTAINED BY AND REPORTED TO THE1
STATE AUDITOR BY THE EMPLOYEE OWNERSHIP OFFICE PURSUANT TO2
SUBSECTION (7)(b) OF THIS SECTION.3
(2) Definitions. A
S USED IN THIS SECTION, UNLESS THE CONTEXT4
OTHERWISE REQUIRES:5
(a) "A
LTERNATE EQUITY STRUCTURE" MEANS A MECHANISM6
UNDER WHICH AN EMPLOYER GRANTS TO EMPLOYEES A FORM OF7
EMPLOYEE OWNERSHIP, INCLUDING BUT NOT LIMITED TO AN EMPLOYEE8
STOCK PURCHASE PLAN, LLC MEMBERSHIP, PHANTOM STOCK, PROFIT9
INTEREST, RESTRICTED STOCK, STOCK APPRECIATION RIGHT, STOCK10
OPTION, OR SYNTHETIC EQUITY. THE OFFICE MAY DEVELOP GUIDELINES11
THAT CLARIFY THE TYPES OF EMPLOYEE OWNERSHIP GRANTS THAT12
QUALIFY AS AN ALTERNATE EQUITY STRUCTURE. AN ALTERNATE EQUITY13
STRUCTURE MUST AT A MINIMUM:14
(I) G
RANT RIGHTS TO OR BE OFFERED TO AT LEAST TWENTY15
PERCENT OF AN EMPLOYER'S ELIGIBLE WORKERS, OR GRANT RIGHTS TO OR16
BE OFFERED TO AT LEAST TWENTY PERCENT OF ELIGIBLE WORKERS OF AN17
EMPLOYER THAT IS OWNED BY OR OPERATED FOR THE BENEFIT OF ELIGIBLE18
WORKERS IN A BROAD-BASED EMPLOYEE OWNERSHIP TRANSITION. FOR19
PURPOSES OF THIS SUBSECTION (2)(a), "ELIGIBLE WORKERS" MEANS ALL20
FULL-TIME EMPLOYEES, REGULAR EMPLOYEES, NON-SEASONAL21
EMPLOYEES, NON-MANAGERIAL EMPLOYEES, AND CONTRACT LABOR.22
(II) H
AVE THE PARTICIPATION OF AT LEAST TWENTY PERCENT OF23
AN EMPLOYER'S ELIGIBLE WORKERS;24
(III) A
LLOCATE AT LEAST TWENTY PERCENT OF THE FULLY25
DILUTED SECURITIES OR RIGHTS TO A SYNTHETIC INTEREST IN SECURITIES26
TO PARTICIPATING ELIGIBLE WORKERS, OR ALLOCATE TWENTY PERCENT OF27
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NET PROFIT FROM OPERATIONS TO PARTICIPATING ELIGIBLE WORKERS; AND1
(IV) G
RANT TO PARTICIPATING ELIGIBLE WORKERS2
INFORMATIONAL RIGHTS, DECISION-MAKING RIGHTS, AND NON-FINANCIAL3
RIGHTS THAT ARE EQUAL TO OR GREATER THAN THE RIGHTS THAT ARE4
GRANTED TO HOLDERS OF THE EMPLOYER'S COMMON STOCK OR HOLDERS5
OF THE EMPLOYER'S RESIDUAL MEMBERSHIP INTEREST.6
(b) "D
EPARTMENT" MEANS THE COLORADO DEPARTMENT OF7
REVENUE.8
(c) "E
LIGIBLE COSTS" MEANS COSTS INCURRED AS A RESULT OF9
BEING A NEW EMPLOYEE-OWNED BUSINESS, AS DETAILED IN THE10
GUIDELINES ISSUED BY THE OFFICE.11
(d) "E
MPLOYEE-OWNED BUSINESS" MEANS A TAXPAYER THAT IS12
SUBJECT TO TAX UNDER THIS ARTICLE 22, INCLUDING BUT NOT LIMITED TO13
A C CORPORATION, S CORPORATION, LIMITED LIABILITY COMPANY,14
PARTNERSHIP, LIMITED LIABILITY PARTNERSHIP, SOLE PROPRIETORSHIP, OR15
OTHER SIMILAR PASS-THROUGH ENTITY, THAT:16
(I) I
S OWNED IN WHOLE OR IN PART BY AN EMPLOYEE OWNERSHIP17
TRUST;18
(II) H
AS AN EMPLOYEE STOCK OWNERSHIP PLAN, IS IN WHOLE OR19
IN PART A WORKER-OWNED COOPERATIVE, OR HAS AN ALTERNATE EQUITY20
STRUCTURE; AND21
(III) H
AS ITS CORPORATE HEADQUARTERS LOCATED IN THIS STATE.22
F
OR PURPOSES OF THIS SUBSECTION (2)(d), "CORPORATE HEADQUARTERS"23
MEANS THE SOLE LOCATION WITHIN A REGIONAL OR NATIONAL AREA24
WHERE THE TAXPAYER'S STAFF MEMBERS OR EMPLOYEES ARE DOMICILED25
AND EMPLOYED, AND WHERE THE MAJORITY OF THE TAXPAYER'S26
FINANCIAL, PERSONNEL, LEGAL, PLANNING, OR OTHER BUSINESS27
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FUNCTIONS ARE CONDUCTED ON A REGIONAL OR NATIONAL BASIS.1
(e) "E
MPLOYEE OWNERSHIP OFFICE" OR "OFFICE" MEANS THE2
EMPLOYEE OWNERSHIP OFFICE CREATED IN SECTION 24-48.5-135.3
(f) "E
MPLOYEE OWNERSHIP TRUST" MEANS AN INDIRECT FORM OF4
EMPLOYEE OWNERSHIP IN WHICH A TRUST HOLDS A CONTROLLING STAKE5
IN A BUSINESS AND BENEFITS ALL EMPLOYEES ON AN EQUAL BASIS.6
(g) "E
MPLOYEE STOCK OWNERSHIP PLAN" HAS THE SAME MEANING7
AS SET FORTH IN SECTION 4975 (e)(7) OF THE INTERNAL REVENUE CODE,8
AS AMENDED.9
(h) "N
EW EMPLOYEE-OWNED BUSINESS" MEANS AN10
EMPLOYEE-OWNED BUSINESS THAT HAS BEEN AN EMPLOYEE-OWNED11
BUSINESS FOR SEVEN YEARS OR FEWER.12
(i) "Q
UALIFIED BUSINESS" MEANS A TAXPAYER THAT IS A NEW13
EMPLOYEE-OWNED BUSINESS.14
(j) "S
ECURITIES" HAS THE SAME MEANING AS THE TERM15
"
SECURITY" SET FORTH IN 15 U.S.C. SEC. 77b (a)(1).16
(k) "T
AX CREDIT" MEANS THE CREDIT AGAINST INCOME TAX17
CREATED IN THIS SECTION.18
(l) "T
AXPAYER" MEANS A PERSON SUBJECT TO TAX PURSUANT TO19
THIS ARTICLE 22.20
(m) "W
ORKER-OWNED COOPERATIVE" HAS THE SAME MEANING AS21
SET FORTH IN SECTION 1042 (c)(2) OF THE INTERNAL REVENUE CODE, AS22
AMENDED.23
(3) Tax credit for new employee-owned businesses.24
(a) S
UBJECT TO CERTIFICATION BY THE OFFICE PURSUANT TO THIS25
SECTION, FOR INCOME TAX YEARS COMMENCING ON OR AFTER JANUARY26
1,
2025, BUT BEFORE JANUARY 1, 2034, A QUALIFIED BUSINESS IS27
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ALLOWED A CREDIT AGAINST THE INCOME TAXES IMPOSED BY THIS1
ARTICLE 22 IN AN AMOUNT EQUAL TO FIFTY PERCENT OF THE ELIGIBLE2
COSTS, NOT TO EXCEED FIFTY THOUSAND DOLLARS, INCURRED BY THE3
QUALIFIED BUSINESS.4
(b) (I) A
QUALIFIED BUSINESS MAY APPLY FOR AND CLAIM ONLY5
ONE TAX CREDIT ALLOWED IN THIS SUBSECTION (3) FOR THE ELIGIBLE6
COSTS INCURRED IN ANY TAX YEAR.7
(II) I
N THE CASE OF A QUALIFIED BUSINESS THAT IS A C8
CORPORATION, THE TAX CREDIT IS ALLOWED TO THE QUALIFIED BUSINESS.9
(III) I
N THE CASE OF A QUALIFIED BUSINESS THAT IS A10
PARTNERSHIP OR AN S CORPORATION, THE TAX CREDIT IS ALLOWED TO THE11
OWNERS OF THE QUALIFIED BUSINESS.12
(4) Tax credit certificate. (a) A
QUALIFIED BUSINESS SHALL13
SUBMIT AN APPLICATION TO THE OFFICE FOR THE CERTIFICATION AND14
ISSUANCE OF A TAX CREDIT CERTIFICATE FOR THE TAX CREDIT ALLOWED15
IN SUBSECTION (3) OF THIS SECTION BY THE DEADLINES ESTABLISHED IN16
THE OFFICE'S GUIDELINES. THE APPLICATION MUST INCLUDE THE17
INFORMATION SET FORTH IN THE OFFICE'S GUIDELINES. THE OFFICE MAY18
IMPOSE A REASONABLE APPLICATION FEE NOT TO EXCEED TWO HUNDRED19
AND FIFTY DOLLARS.20
(b) T
O CLAIM THE TAX CREDIT ALLOWED IN SUBSECTION (3) OF21
THIS SECTION, A QUALIFIED BUSINESS MUST ANNUALLY APPLY FOR AND22
RECEIVE A TAX CREDIT CERTIFICATE FROM THE OFFICE PURSUANT TO THIS23
SUBSECTION (4). THE SUBMISSION OF AN APPLICATION DOES NOT ENTITLE24
THE QUALIFIED BUSINESS TO THE ISSUANCE OF A TAX CREDIT CERTIFICATE.25
(c) T
HE OFFICE SHALL DOCUMENT THE DATE AND TIME THAT A26
COMPLETE APPLICATION WAS RECEIVED AND SHALL REVIEW COMPLETE27
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APPLICATIONS IN THE ORDER IN WHICH THEY ARE RECEIVED. IF THE OFFICE1
DETERMINES THAT AN APPLICANT IS NOT ENTITLED TO A TAX CREDIT2
CERTIFICATE, THE OFFICE SHALL NOTIFY THE APPLICANT OF ITS3
DISAPPROVAL IN WRITING.4
(d) I
F THE OFFICE IS SATISFIED THAT THE REQUIREMENTS OF THIS5
SECTION AND THE OFFICE'S GUIDELINES FOR THE TAX CREDIT ARE MET,6
THEN THE OFFICE SHALL ISSUE TO THE QUALIFIED BUSINESS A TAX CREDIT7
CERTIFICATE THAT EVIDENCES THE QUALIFIED BUSINESS'S RIGHT TO CLAIM8
THE TAX CREDIT ALLOWED IN SUBSECTION (3) OF THIS SECTION. THE9
OFFICE SHALL NOT ISSUE TAX CREDIT CERTIFICATES IN EXCESS OF THE10
MAXIMUM AGGREGATE AMOUNT FOR ANY SINGLE INCOME TAX YEAR11
SPECIFIED IN SUBSECTION (4)(e) OF THIS SECTION.12
(e) (I) T
HE MAXIMUM AGGREGATE AMOUNT OF ALL TAX CREDIT13
CERTIFICATES THAT THE OFFICE MAY ISSUE PURSUANT TO THIS SECTION IN14
ANY SINGLE INCOME TAX YEAR IS ONE MILLION FIVE HUNDRED THOUSAND15
DOLLARS.16
(II) N
OTWITHSTANDING ANY OTHER PROVISION OF THIS SECTION,17
IF THE MAXIMUM AGGREGATE AMOUNT IN SUBSECTION (4)(e)(I) OF THIS18
SECTION IS NOT REQUESTED AND ISSUED BY THE OFFICE IN A SINGLE19
INCOME TAX YEAR, THE OFFICE MAY ISSUE THE UNUSED AMOUNT IN TAX20
CREDIT CERTIFICATES IN SUBSEQUENT INCOME TAX YEARS.21
(5) Claiming tax credit. T
O CLAIM THE TAX CREDIT ALLOWED IN22
SUBSECTION (3) OF THIS SECTION, THE QUALIFIED BUSINESS SHALL FILE23
THE TAX CREDIT CERTIFICATE WITH THE QUALIFIED BUSINESS'S STATE24
INCOME TAX RETURN. THE AMOUNT OF THE TAX CREDIT THAT THE25
QUALIFIED BUSINESS MAY CLAIM UNDER THIS SECTION IS THE AMOUNT26
STATED ON THE TAX CREDIT CERTIFICATE ISSUED PURSUANT TO27
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SUBSECTION (4) OF THIS SECTION.1
(6) Tax credit refundable. I
F THE AMOUNT OF THE TAX CREDIT2
EXCEEDS THE TAXES DUE ON THE INCOME OF THE QUALIFIED BUSINESS FOR3
THE TAXABLE YEAR FOR WHICH THE TAX CREDIT IS CLAIMED, THE AMOUNT4
OF THE TAX CREDIT NOT USED TO OFFSET INCOME TAXES MUST BE5
REFUNDED TO THE QUALIFIED BUSINESS.6
(7) Guidelines and reporting requirements. (a) T
HE OFFICE7
SHALL DEVELOP GUIDELINES FOR THE ADMINISTRATION OF THIS SECTION8
AND POST THE GUIDELINES ON THE WEBSITE OF THE OFFICE OF ECONOMIC9
DEVELOPMENT AND INTERNATIONAL TRADE. THE GUIDELINES MUST10
INCLUDE:11
(I) A
PPLICATION REQUIREMENTS;12
(II) G
UIDELINES FOR ISSUING TAX CREDIT CERTIFICATES;13
(III) G
UIDELINES REGARDING ELIGIBLE COSTS; AND14
(IV) G
UIDELINES FOR APPROVING A BUSINESS AS A QUALIFIED15
BUSINESS.16
(b) T
HE OFFICE SHALL MAINTAIN A DATABASE OF ANY17
INFORMATION DETERMINED NECESSARY BY THE OFFICE TO EVALUATE THE18
EFFECTIVENESS OF THE TAX CREDIT ALLOWED IN THIS SECTION IN19
ACHIEVING THE PURPOSES SET FORTH IN SUBSECTION (1)(a) OF THIS20
SECTION AND SHALL PROVIDE THIS INFORMATION, AND ANY OTHER21
INFORMATION THAT MAY BE NEEDED, TO THE STATE AUDITOR AS PART OF22
THE STATE AUDITOR'S EVALUATION OF TAX EXPENDITURES UNDER SECTION23
39-21-305.24
(c) T
HE OFFICE SHALL REVIEW THE EFFECTIVENESS OF THE TAX25
CREDIT AND INCLUDE THE RESULTS OF THE REVIEW IN THE ANNUAL26
REPORT SUBMITTED TO THE GENERAL ASSEMBLY BY THE OFFICE OF27
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ECONOMIC DEVELOPMENT. NOTWITHSTANDING THE REQUIREMENT IN1
SECTION 24-1-136 (11)(a)(I), THE REQUIREMENT TO SUBMIT THE REPORT2
REQUIRED IN THIS SUBSECTION (7)(c) CONTINUES UNTIL THE ANNUAL3
REPORT FOLLOWING THE INCOME TAX YEAR COMMENCING JANUARY 1,4
2034.5
(d) T
HE OFFICE SHALL PROVIDE THE DEPARTMENT WITH AN6
ELECTRONIC REPORT OF EACH QUALIFIED BUSINESS AND OWNER OF A7
QUALIFIED BUSINESS TO WHICH THE OFFICE ISSUED A TAX CREDIT8
CERTIFICATE FOR THE PRECEDING CALENDAR YEAR. THE OFFICE SHALL9
PROVIDE THIS REPORT IN A SUFFICIENTLY TIMELY MANNER TO ALLOW THE10
DEPARTMENT TO PROCESS RETURNS CLAIMING THE INCOME TAX CREDIT11
ALLOWED IN THIS SECTION. THIS REPORT MUST INCLUDE:12
(I) T
HE TAXPAYER'S NAME;13
(II) T
HE TAX IDENTIFICATION NUMBER OF THE TAXPAYER TO14
WHOM THE TAX CREDIT CERTIFICATE IS ISSUED; AND15
(III) T
HE AMOUNT OF THE TAX CREDIT CERTIFICATE.16
(8) Repeal. T
HIS SECTION IS REPEALED, EFFECTIVE DECEMBER 31,17
2038.18
SECTION 4. Act subject to petition - effective date. This act19
takes effect at 12:01 a.m. on the day following the expiration of the20
ninety-day period after final adjournment of the general assembly; except21
that, if a referendum petition is filed pursuant to section 1 (3) of article V22
of the state constitution against this act or an item, section, or part of this23
act within such period, then the act, item, section, or part will not take24
effect unless approved by the people at the general election to be held in25
November 2024 and, in such case, will take effect on the date of the26
official declaration of the vote thereon by the governor.27
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