An Act Creating and Sustaining Jobs Through the Development of
Maine Legislature, Session 132, LD 0756
Committee: Taxation
Sponsors: RENY, GEIGER
Amends: 5 MRSA §13062, 36 MRSA §5122, 36 MRSA §5200-A, 36 MRSA §5206, 36 MRSA §5206-D

Legislative Document
No. 756
S.P. 271
In Senate, February 25, 2025
An Act Creating and Sustaining Jobs Through the Development of 
Cooperatives and Employee-owned Businesses by Providing Tax 
Deductions for Certain Qualified Business Activities
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 GEIGER of Rockland and
Senators: CURRY of Waldo, MOORE of Washington, TIPPING of Penobscot, 
Representatives: EATON of Deer Isle, HEPLER of Woolwich, STOVER of Boothbay.
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.  Connect 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 to 
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; and
(3)  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, 2025, 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; 
or
(5)  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, 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 that is registered with the Secretary of State or 
whose principal place of business is within the State.
Sec. 4.  36 MRSA §5122, sub-§2, ¶BBB is enacted to read:
BBB.  For taxable years beginning on or after January 1, 2025, 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, 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 that is registered with the Secretary of State or whose principal place of 
business is within the State; 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)  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, 2025, 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; 
or
(5)  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, 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 that is registered with the Secretary of State or 
whose principal place of business is within the State.
Sec. 6.  36 MRSA §5200-A, sub-§2, ¶KK is enacted to read:
KK.  For taxable years beginning on or after January 1, 2025, 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, 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 that is registered with the Secretary of State or whose principal place of 
business is within the State; 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)  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, 2025, a financial institution subject 
to tax under this section 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 
financial institution 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, 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 that is registered with the Secretary of State or whose principal place of 
business is within the State.
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 (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)  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 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.
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 or agricultural 
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 or agricultural producer cooperative and allows 
financial institutions subject to the franchise tax to subtract from Maine net income an 
amount equal to the interest received during the taxable year with respect to a qualified 
business acquisition loan.
3.  It requires the Department of Economic and Community Development, Office of 
Business Development to contract with a nonprofit economic 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 that 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.