An Act To Create and Sustain Jobs through Development of Cooperatives and Employee-owned Businesses
Maine Legislature, Session 129, LD 1520
Committee: Innovation, Development, Economic Advancement and Business
Sponsors: LIBBY, DAUGHTRY, DOW, HERBIG, MOORE, POULIOT, BICKFORD, HICKMAN, PERRY, TUELL
Amends: 5 MRSA §13058, 5 MRSA §13062, 36 MRSA §191, 36 MRSA §199-F, 36 MRSA §5122, 36 MRSA §5200-A, 36 MRSA §5206, 36 MRSA §5206-D

Legislative Document
No. 1520
S.P. 469
In Senate, April 9, 2019
An Act To Create and Sustain Jobs through Development of 
Cooperatives and Employee-owned Businesses
Reference to the Committee on Innovation, Development, Economic Advancement and 
Business suggested and ordered printed.
DAREK M. GRANT
Secretary of the Senate
Presented by Senator LIBBY of Androscoggin.
Cosponsored by Representative DAUGHTRY of Brunswick and
Senators: DOW of Lincoln, HERBIG of Waldo, MOORE of Washington, POULIOT of 
Kennebec, Representatives: BICKFORD of Auburn, HICKMAN of Winthrop, PERRY of 
Calais, TUELL of East Machias.
Be it enacted by the People of the State of Maine as follows:
Sec. 1.  5 MRSA §13058, sub-§10-B is enacted to read:
10-B.  Prioritization of lending or grants.  Notwithstanding any provision of law to 
the contrary, the commissioner shall prioritize lending or grants from any fund or 
program maintained by the department for the purpose of encouraging business 
development in this State as follows:
A.  To employee-owned businesses; 
B.  To businesses that are becoming employee-owned through the purchase of stock 
or business assets; and
C.  To start-up businesses that will be owned by substantially all of the employees.
Sec. 2.  5 MRSA §13062, 2nd ¶, as enacted by PL 1987, c. 534, Pt. A, §§17 and 
19, is amended to read:
The Office of Business Development shall be is responsible for the implementation 
of a program consisting of 3 4 primary elements.
Sec. 3.  5 MRSA §13062, sub-§4 is enacted to read:
4.  Encouragement of employee ownership of businesses.  The office shall:
A.  Develop educational programs, including convening an annual conference on 
employee ownership issues;
B.  Provide information about employee ownership and technical assistance to 
retiring business owners, employees of plants threatened with closure and 
entrepreneurs interested in creating businesses with broadly shared ownership;
C.  Link Maine businesses interested in implementing employee ownership to 
available financial, technical and legal resources;
D.  Assist firms and employee groups in performing preliminary feasibility studies to 
determine the initial feasibility of employee ownership and whether the business and 
employee group should perform a full feasibility study;
E.  Help businesses interested in implementing some form of employee ownership 
obtain financing;
F.  Promote best practices for operating employee-owned businesses; and
G.  Recommend legislative or executive action to promote employee ownership.
Sec. 4.  36 MRSA §191, sub-§2, ¶HHH is enacted to read:
HHH.  The disclosure to the joint standing committee of the Legislature having 
jurisdiction over taxation matters of information necessary to make the report 
required under section 199-F, subsection 2.
Sec. 5.  36 MRSA §199-F is enacted to read:
§199-F.  Transfers to cooperatives and employee-owned businesses
1.  Information.  The bureau shall require taxpayers claiming the exclusion for gain 
on sale of a business under section 5122, subsection 2, paragraph QQ and section 
5200-A, subsection 2, paragraph FF and the exclusion for interest on a loan financing 
acquisition of a business under section 5122, subsection 2, paragraph RR, section 
5200-A, subsection 2, paragraph GG and section 5206 to provide information that 
identifies the standard industrial classification of the business that is being transferred, the 
total value of the transaction to which the tax expenditure relates, the average number of 
full-time equivalent employees employed by the business being transferred during the 
calendar year preceding the transfer and the number of units of housing owned or 
controlled by the business in question.
2.  Report.  By December 1st of each year beginning in 2022, the bureau shall submit 
a report to the Office of Program Evaluation and Government Accountability established 
in Title 3, section 991 and the committee identifying the United States Department of 
Commerce, Bureau of the Census, North American Industry Classification System code 
identification and location of each transaction for which a deduction was claimed under 
section 5122, subsection 2, paragraph RR, section 5200-A, subsection 2, paragraph GG 
and section 5206 during the previous calendar year, the aggregate number of full-time 
equivalent employees employed by the businesses for which a deduction was claimed and 
the aggregate number of units of housing owned or controlled by the businesses for which 
a deduction was claimed.  Notwithstanding any other provision of law to the contrary, the 
reports provided under this section are public records as defined in Title 1, section 402, 
subsection 3.
Sec. 6.  36 MRSA §5122, sub-§2, ¶¶QQ and RR are enacted to read:
QQ.  For taxable years beginning on or after January 1, 2020, to the extent included 
in federal adjusted gross income and to the extent otherwise subject to Maine income 
tax, an amount equal to any gain recognized on the sale by the taxpayer of a majority 
ownership interest in a qualified business if the business was transferred to:
(1)  An employee stock ownership plan as defined in the Code, Section 
4975(e)(7);
(2)  An S corporation organized in the State owned by an employee stock 
ownership plan;
(3)  An eligible worker-owned cooperative as defined in the Code, Section 
1042(c)(2);
(4)  A consumer cooperative organized under Title 13, chapter 85, subchapter 1; 
or
(5)  If the business provides housing, a consumer cooperative or a cooperative 
affordable housing corporation organized under Title 13, chapter 85, subchapter 
1-A.
The deduction allowed pursuant to this paragraph may not exceed $750,000.
For purposes of this paragraph, "qualified business" means a business whose 
securities are not publicly traded on any stock exchange and that is organized in the 
State or whose principal place of business is within the State including a corporation, 
an S corporation, a limited liability company, a limited liability partnership, a sole 
proprietorship and all entities that are not publicly traded and are related by common 
majority ownership or control.
RR.  For taxable years beginning on or after January 1, 2020, to the extent included in 
federal adjusted gross income and to the extent otherwise subject to Maine income 
tax, an amount equal to the interest received during the taxable year by the taxpayer 
with respect to a qualified business acquisition loan.  For purposes of this paragraph:
(1)  "Qualified business" means a business whose securities are not publicly 
traded on any stock exchange and that is organized in the State or whose 
principal place of business is within the State including a corporation, an S 
corporation, a limited liability company, a limited liability partnership, a sole 
proprietorship and all entities that are not publicly traded and are related by 
common majority ownership or control; and
(2)  "Qualified business acquisition loan," including a loan or part of a series of 
loans, means:
(a)  A loan of which at least 90% of the proceeds are applied to the 
acquisition of majority equity ownership of a qualified business not owned 
by an entity under subdivisions (i) to (v) and that is given to:
(i)  An employee stock ownership plan as defined in the Code, Section 
4975(e)(7);
(ii)  An S corporation organized in the State owned by an employee stock 
ownership plan;
(iii)  An eligible worker-owned cooperative as defined in the Code, 
Section 1042(c)(2);
(iv)  A consumer cooperative organized under Title 13, chapter 85, 
subchapter 1; or
(v)  If the business provides housing, a consumer cooperative or a 
cooperative affordable housing corporation organized under Title 13, 
chapter 85, subchapter 1-A; 
(b)  A loan to a corporation that sponsors an employee stock ownership plan 
if all proceeds of the loan are loaned to the employee stock ownership plan to 
acquire for the plan all outstanding employer securities in a qualified 
business and the plan's repayment terms are substantially similar to the 
corporation's repayment terms; or
(c)  A loan used to refinance a qualified business acquisition loan.
Sec. 7.  36 MRSA §5200-A, sub-§2, ¶¶FF and GG are enacted to read:
FF.  For taxable years beginning on or after January 1, 2020, to the extent included in 
federal taxable income and to the extent otherwise subject to Maine income tax, an 
amount equal to any gain recognized on the sale by the taxpayer of a majority 
ownership interest in a qualified business if the business was transferred to:
(1)  An employee stock ownership plan as defined in the Code, Section 
4975(e)(7);
(2)  An S corporation organized in the State owned by an employee stock 
ownership plan;
(3)  An eligible worker-owned cooperative as defined in the Code, Section 
1042(c)(2);
(4)  A consumer cooperative organized under Title 13, chapter 85, subchapter 1; 
or
(5)  If the business provides housing, a consumer cooperative or a cooperative 
affordable housing corporation organized under Title 13, chapter 85, subchapter 
1-A.
The deduction allowed pursuant to this paragraph may not exceed $750,000.
For purposes of this paragraph, "qualified business" means a business whose 
securities are not publicly traded on any stock exchange and that is organized in the 
State or whose principal place of business is within the State including a corporation, 
an S corporation, a limited liability company, a limited liability partnership, a sole 
proprietorship and all entities that are not publicly traded and are related by common 
majority ownership or control.
GG.  For taxable years beginning on or after January 1, 2020, to the extent included 
in federal taxable income and to the extent otherwise subject to Maine income tax, an 
amount equal to the interest received during the taxable year by the taxpayer with 
respect to a qualified business acquisition loan.  For purposes of this paragraph:
(1)  "Qualified business" means a business whose securities are not publicly 
traded on any stock exchange and that is organized in the State or whose 
principal place of business is within the State including a corporation, an S 
corporation, a limited liability company, a limited liability partnership, a sole 
proprietorship and all entities that are not publicly traded and are related by 
common majority ownership or control; and
(2)  "Qualified business acquisition loan," including a loan or part of a series of 
loans, means:
(a)  A loan of which at least 90% of the proceeds are applied to the 
acquisition of majority equity ownership of a qualified business not owned 
by an entity under subdivisions (i) to (v) and that is given to:
(i)  An employee stock ownership plan as defined in the Code, Section 
4975(e)(7);
(ii)  An S corporation organized in the State owned by an employee stock 
ownership plan;
(iii)  An eligible worker-owned cooperative as defined in the Code, 
Section 1042(c)(2);
(iv)  A consumer cooperative organized under Title 13, chapter 85, 
subchapter 1; or
(v)  If the business provides housing, a consumer cooperative or a 
cooperative affordable housing corporation organized under Title 13, 
chapter 85, subchapter 1-A;
(b)  A loan to a corporation that sponsors an employee stock ownership plan 
if all proceeds of the loan are loaned to the employee stock ownership plan to 
acquire for the plan all outstanding employer securities in a qualified 
business and the plan's repayment terms are substantially similar to the 
corporation's repayment terms; or
(c)  A loan used to refinance a qualified business acquisition loan.
Sec. 8.  36 MRSA §5206, as repealed and replaced by PL 2005, c. 608, §1 and 
affected by §5, is amended by adding at the end a new paragraph to read:
For taxable years beginning on or after January 1, 2020, the taxpayer may for the 
purposes of the tax under this section subtract from Maine net income an amount equal to 
the interest received during the taxable year by the taxpayer with respect to a qualified 
business acquisition loan.
Sec. 9.  36 MRSA §5206-D, sub-§13, as amended by PL 1999, c. 414, §43 and 
affected by §57, is further amended to read:
13.  Maine net income.  "Maine net income" means, for any taxable year, a financial 
institution's net income or loss per books required to be reported pursuant to the laws of 
the United States on Internal Revenue Service Form 1120, 1120S, 1065 or any other 
Internal Revenue Service form used to report net income or loss per books or, in the case 
of an entity with a single owner that may be disregarded as an entity separate from its 
owner pursuant to Internal Revenue Service regulations, the financial institution's net 
income or loss per books determined as if the entity were required to file Internal 
Revenue Service Form 1065, adjusted in accordance with section 5206, and apportioned 
to this State under section 5206-E.  In the case of a financial institution that is a qualified 
subchapter S subsidiary as defined by the Code, Section 1361, the financial institution's 
"Maine net income" means a financial institution's net income or loss per books 
determined as if the entity were required to file Internal Revenue Service Form 1120S 
and apportioned to this State under section 5206-E.
To the extent that a financial institution derives income from a unitary business carried on 
by 2 or more members of an affiliated group, "Maine net income" is determined by 
apportioning, in accordance with section 5206-E, that part of the net income of the entire 
group that derives from the unitary business.
Sec. 10.  36 MRSA §5206-D, sub-§§16-A and 16-B are enacted to read:
16-A.  Qualified business.  "Qualified business" means a business whose securities 
are not publicly traded on any stock exchange and that is organized in the State or whose 
principal place of business is within the State including a corporation, an S corporation, a 
limited liability company, a limited liability partnership, a sole proprietorship and all 
entities that are not publicly traded and are related by common majority ownership or 
control.
16-B.  Qualified business acquisition loan.  "Qualified business acquisition loan," 
including a loan or part of a series of loans, means:
A.  A loan of which at least 90% of the proceeds are applied to the acquisition of 
majority equity ownership of a qualified business not owned by an entity under 
subparagraphs (1) to (5) and that is given to:
(1)  An employee stock ownership plan as defined in the Code, Section 
4975(e)(7);
(2)  An S corporation organized in the State owned by an employee stock 
ownership plan;
(3)  An eligible worker-owned cooperative as defined in the Code, Section 
1042(c)(2);
(4)  A consumer cooperative organized under Title 13, chapter 85, subchapter 1; 
or
(5)  If the business provides housing, a consumer cooperative or a cooperative 
affordable housing corporation organized under Title 13, chapter 85, subchapter 
1-A;
B.  A loan to a corporation that sponsors an employee stock ownership plan if all 
proceeds of the loan are loaned to the employee stock ownership plan to acquire for 
the plan all outstanding employer securities in a qualified business and the plan's 
repayment terms are substantially similar to the corporation's repayment terms; or
C.  A loan used to refinance a qualified business acquisition loan.
Sec. 11.  Evaluation; specific public policy objective; performance 
measures.  The deductions provided under this Act are subject to ongoing legislative 
review in accordance with the Maine Revised Statutes, Title 3, chapter 37.  The Office of 
Program Evaluation and Government Accountability shall report on the first evaluation of 
the deductions provided under this Act by February 28, 2027.  In developing evaluation 
parameters to perform the evaluation, the Office of Program Evaluation and Government 
Accountability, the Government Oversight Committee and the joint standing committee 
of the Legislature having jurisdiction over taxation matters shall consider:
1.  Policy objective.  That the specific public policy objective of the deductions 
provided under this Act is to retain jobs in qualifying businesses that would otherwise 
cease operations by reducing the tax impact to business owners from qualifying sales of 
ownership interests in order to encourage conversion of businesses to employee and 
cooperative ownership and thereby allow the businesses to continue operations and retain 
jobs; and
2.  Performance measures.  Performance measures, including, but not limited to:
A.  The number of qualifying business ownership conversions to employee or 
cooperative ownership;
B.  The number of full-time equivalent jobs retained; and
C.  Measures of fiscal impact and overall economic impact to the State.
Sec. 12.  Investment study by Maine Public Employees Retirement 
System.  The Maine Public Employees Retirement System, referred to in this section as 
"the system," shall conduct a study to determine how funds held by the system, from 
whatever source, may be invested responsibly in employee-owned businesses in this 
State.  The system shall provide the results of its study and any recommendations to the 
Joint Standing Committee on Innovation, Development, Economic Advancement and 
Business no later than January 15, 2020.  The committee may report out a bill to the 
recommendations of the system.
SUMMARY
This bill supports employee-owned businesses and cooperatives in the following 
ways.
1.  It excludes from Maine income tax the amount of gain, up to a maximum of 
$750,000 recognized by a business owner in transferring the business to an employee 
stock ownership plan, eligible worker-owned cooperative, consumer cooperative or 
affordable housing cooperative.
2.  It excludes from Maine income tax interest from loans that finance transfers of 
ownership from a business to an employee stock ownership plan, eligible worker-owned 
cooperative, consumer cooperative or affordable housing cooperative.
3.  It requires the Department of Economic and Community Development, Office of 
Business Development to encourage and assist employee-owned businesses by requiring 
the office to: develop educational programs, including convening an annual conference 
on employee ownership issues; provide information about employee ownership and 
technical assistance to retiring business owners, employees of plants threatened with 
closure and entrepreneurs interested in creating businesses with broadly shared 
ownership; link Maine businesses interested in implementing employee ownership to 
available financial, technical and legal resources; and help businesses interested in 
implementing some form of employee ownership to obtain financing, as well as 
undertake other duties.
4.  It requires the Commissioner of Economic and Community Development to give 
priority to employee-owned businesses, either established or in the process of becoming 
employee-owned, when providing loans or grants from funds or programs maintained by 
the department.
5.  It requires the Maine Public Employees Retirement System to conduct a study to 
determine how funds held by the system may be invested responsibly in employee-owned 
businesses in this State and to report its findings to the Joint Standing Committee on 
Innovation, Development, Economic Advancement and Business, which is authorized to 
report out a bill to the Second Regular Session of the 129th Legislature based on the 
study and recommendations of the system.