SB 40

This bill enacts the "Employee Ownership, Empowerment, and Expansion Act, which creates tax incentives for businesses to establish employee stock ownership plans or employee ownership trusts, or to convert to a worker-owned cooperative, as discussed below. TAX CREDIT For tax years commencing on or after January 1, 202 6, but p rior to January 1, 20 31, this bill creates an excise tax credit in the tax year in which a conversion is completed, as follows: (1) Up to 50 % of the conversion costs, not to exceed $25, 000, incurred by a qualified business for converting the qualified b usiness to a worker-owned cooperative or an employee ownership trust; or (2) Up to 50 % of the conversion costs, not to exceed $100, 000, incurred by a qualified business for converting the qualified business to an employee stock ownership plan. For pur poses of this bill, a ""qualified business"" means a taxpayer subject to a state excise tax, including a C corporation, S corporation, limited liability company, or limited liability partnership that is not owned by an employee ownership trust, does not have an employee stock ownership plan, or is not a worker owned cooperative, and is approved by the department of revenue for the tax incentives. This bill allows unused credit to be carried forward in any tax period until the credit is taken, as long as th e credit is not carried forward for more than 25 years. To request a credit, this bill requires the taxpayer to file an application with the commissioner on a form prescribed by the commissioner, and include a cost certification of the estimated conversi on costs. Additionally, the commissioner is required to review the documentation submitted by the taxpayer and to notify the taxpayer of an approved credit. This bill authorizes the commissioner to promulgate rules to effectuate this bill; to conduct aud its or require the filing of additional information necessary to substantiate or adjust the amount of the credit allowed by this section; and to determine that the taxpayer has complied with all statutory requirements for the credit. This bill requires t he department to do the following: (1) Conduct statewide outreach efforts, within existing resources, to minority-owned businesses about the availability of the tax credit allowed in this bill; and (2) On or before January 1, 2026, submit a one-time report to the finance, ways and means committees of the house of representatives and senate, setting forth the metrics and data requirements that the department will track in order to allow the general assembly to measure the effectiveness of the tax expe n diture allowed under this bill. TAX EXEMPTIONS This bill exempts from taxes imposed under the Business Tax Act a worker-owned cooperative, an employee ownership trust, or an employee stock ownership plan. This provision takes effect January 1, 2026, an d applies to tax periods that begin on or after that date. OTHER INCENTIVES This bill extends the application of the Tennessee Minority-Owned, Woman-Owned, Service-Disabled Veteran-Owned, Business Owned by Persons with Disabilities, and Small Business P rocurement and Contracting Act, which governs public contracts with such entities, to employee-owned businesses in this state."