On September 14, 2016, the Missouri Legislature overrode Gov. Jay Nixon’s veto of House Bill 2030, making it law. Beginning January 1, 2017, there will be a 50 percent income tax deduction of the net capital gain recognized on the business owner’s federal income tax return from the sale or exchange of Missouri corporation employer securities to a qualified Missouri employee stock ownership plan (ESOP).
To qualify for the deduction, the ESOP must own at least 30 percent of all outstanding employer securities issued by the Missouri corporation upon transaction completion. This provision only will apply until December 31, 2022, unless reauthorized.
Selling to an ESOP can be an attractive alternative to consider as part of a business succession strategy for a variety of tax and nontax reasons. This law adds another tax advantage for business owners who pay Missouri income tax.
Do you have an existing ESOP or are you considering selling all or a portion of your business? Contact your BKD advisor to discuss the potential planning opportunities presented by ESOPs.