On January 8, 2013, NJ Assemblyman and Deputy Speaker of the New Jersey State Legislature, Upendra Chivukula, introduced a bill to encourage small businesses to establish ESOPs in the state.
The bill provides a gross income tax exclusion for certain capital gains from the sale of employer securities of a non-publically traded business to an employee stock ownership plan, a New Jersey S corporation owned by an employee stock ownership plan, or an eligible worker-owned cooperative, benefiting employees of the business in the state. The purpose of this bill is to incentivize small businesses to establish employee stock ownership plans, which allow companies to share ownership with employees without requiring employees to invest their own money. In addition, this bill encourages small business owners to sell their businesses to the very employees that contributed to their success. This will help to ensure that local businesses are not sold to out-of state buyers, which is often detrimental to the fabric of local communities.
Steve Greenapple, Principal of SES and of our sister law firm of Steiker, Greenapple, & Fusco, P.C., “called Assemblyman Chivukula’s office to applaud introduction of A3626, a bill to exclude from taxation any gains on the sale of at least 30% of a company to an ESOP or eligible worker cooperative (as defined by Section 1042 of the Internal Revenue Code). Unlike federal law, the bill includes sales to ESOP in S corporations.”