An Act to Create and Sustain Jobs and Affordable Housing Through the Development of Cooperatives and Employee-owned Businesses
Maine Legislature, Session 131, LD 1276
Committee: Taxation
Sponsors: RENY, STOVER, DAUGHTRY, GROHOSKI, POULIOT, EATON, HEPLER
Amends: 5 MRSA §13062, 36 MRSA §5122, 36 MRSA §5200-A, 36 MRSA §5206, 36 MRSA §5206-D

Legislative Document
No. 1276
S.P. 513
In Senate, March 21, 2023
An Act to Create and Sustain Jobs and Affordable Housing 
Through the Development of Cooperatives and Employee-owned 
Businesses
Reference to the Committee on Taxation suggested and ordered printed.
DAREK M. GRANT
Secretary of the Senate
Presented by Senator RENY of Lincoln.
Cosponsored by Representative STOVER of Boothbay and
Senators: DAUGHTRY of Cumberland, GROHOSKI of Hancock, POULIOT of Kennebec, 
Representatives: EATON of Deer Isle, HEPLER of Woolwich.
Be it enacted by the People of the State of Maine as follows:
Sec. 1.  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. 2.  5 MRSA §13062, sub-§4 is enacted to read:
4.  Encouragement of employee ownership of businesses; Maine Employee 
Ownership Center.  The office shall contract with a nonprofit economic development 
organization with relevant expertise to develop and manage an office, to be known as the 
Maine Employee Ownership Center, that 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;
G.  Recommend legislative or executive action to promote employee ownership; and
H.  Work with the Office of Program Evaluation and Government Accountability to 
define the scope of data collection and to collect data and other information to facilitate 
tax expenditure review under Title 3, chapter 37, including, but not limited to:
(1) The number of business ownership conversions to employee or cooperative 
ownership;
(2)  The number of full-time equivalent jobs retained as a result of conversions to 
employee or cooperative ownership;
(3)  The number of housing units converted to cooperative ownership; and
(4)  Data and information regarding other measures of the fiscal impact and overall 
economic development in the State as the result of conversions to employee or 
cooperative ownership.
Sec. 3.  36 MRSA §5122, sub-§2, ¶AAA is enacted to read:
AAA.  For taxable years beginning on or after January 1, 2024, 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 an ownership 
interest greater than 50% 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;
(5)  If the business provides housing, a consumer cooperative or a cooperative 
affordable housing corporation organized under Title 13, chapter 85, subchapter 
1-A; or
(6)  A producer cooperative organized under Title 13, chapter 85, subchapter 2.
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 registered with the Secretary 
of 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.
Sec. 4.  36 MRSA §5122, sub-§2, ¶BBB is enacted to read:
BBB.  For taxable years beginning on or after January 1, 2024, 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 registered with the Secretary of 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 (vi) 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;
(v)  If the business provides housing, a consumer cooperative or a 
cooperative affordable housing corporation organized under Title 13, 
chapter 85, subchapter 1-A; or
(vi)  A producer cooperative organized under Title 13, chapter 85, 
subchapter 2;
(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. 5.  36 MRSA §5200-A, sub-§2, ¶JJ is enacted to read:
JJ.  For taxable years beginning on or after January 1, 2024, 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 an ownership 
interest greater than 50% 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;
(5)  If the business provides housing, a consumer cooperative or a cooperative 
affordable housing corporation organized under Title 13, chapter 85, subchapter 
1-A; or
(6)  A producer cooperative organized under Title 13, chapter 85, subchapter 2.
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 registered with the Secretary 
of 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.
Sec. 6.  36 MRSA §5200-A, sub-§2, ¶KK is enacted to read:
KK.  For taxable years beginning on or after January 1, 2024, 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 registered with the Secretary of 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 (vi) 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;
(v)  If the business provides housing, a consumer cooperative or a 
cooperative affordable housing corporation organized under Title 13, 
chapter 85, subchapter 1-A; or
(vi)  A producer cooperative organized under Title 13, chapter 85, 
subchapter 2;
(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 §5206, as amended by PL 2019, c. 607, Pt. C, §4, is further 
amended by enacting at the end a new paragraph to read:
For taxable years beginning on or after January 1, 2024, 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. 8.  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. 9.  36 MRSA §5206-D, sub-§16-A is 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 registered with the Secretary of 
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.
Sec. 10.  36 MRSA §5206-D, sub-§16-B is enacted to read:
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 (6) 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;
(5)  If the business provides housing, a consumer cooperative or a cooperative 
affordable housing corporation organized under Title 13, chapter 85, subchapter 
1-A; or
(6)  A producer cooperative organized under Title 13, chapter 85, subchapter 2;
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 include review of deductions 
provided under this Act in its regular schedule of tax expenditure reviews.  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 preserve and expand units of affordable housing in 
manufactured housing parks and apartment buildings and 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 units of affordable housing 
created or retained;
C.  The number of housing units converted to cooperative housing; and
D.  Measures of fiscal impact and overall economic impact to the State.
SUMMARY
This bill does the following to support employee-owned businesses and cooperatives.
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, affordable 
housing cooperative or agriculture producer 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, affordable housing cooperative or agriculture producer 
cooperative.
3.  It requires the Department of Economic and Community Development, Office of 
Business Development to contract with a nonprofit development organization with relevant 
expertise to develop and manage the Maine Employee Ownership Center to provide 
information and programs to assist businesses in the transition to employee or cooperative 
ownership. 
4.  It specifies performance measures 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 must consider in 
developing evaluation parameters to perform the review of the deductions provided under 
this bill as required by the Maine Revised Statutes, Title 3, chapter 37.