Colorado Passes Tax Legislation to Encourage Employee Ownership
On June 23, 2021, Colorado Gov. Jared Polis signed into law H.B. 21-1311. This law provides $10 million in annual tax credits over a six-year period to encourage employee ownership. This credit is available to Colorado-headquartered businesses that meet certain criteria. Businesses can use these funds to convert to an employee stock ownership plan (ESOP), employee ownership trust, or worker cooperative. These tax credits can be used to offset professional service costs related to the conversion process, such as legal services, accounting services, and business valuation services. ESOPs can qualify for a credit of up to 50 percent of the conversion costs (with a maximum credit of $50,000).
This program will be administered by the Employee Ownership Office, which is a division of the Colorado Office of Economic Development and International Trade. The application process officially launched on January 1, 2022, and the credit is available through January 1, 2027. Businesses must apply for and reserve the tax credit prior to completing the conversion to employee ownership.
“I’m incredibly excited to launch this new tax credit to save Colorado businesses money,” said Polis. “Employee ownership is a business model with limitless potential to boost employee morale, engagement and retention. We are hopeful that by covering up to 50 percent of the costs of converting, we will see more Colorado small businesses take advantage of this forward-looking business opportunity.”
To learn more about this tax credit and whether an ESOP might be a good fit for your Colorado business, reach out to your BKD Trusted Advisor™ or submit the Contact Us form below.