S T A T E O F N E W Y O R K
________________________________________________________________________
962
2023-2024 Regular Sessions
I N S E N A T E
January 9, 2023
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Introduced by Sens. BAILEY, ADDABBO, COMRIE, GOUNARDES, HOYLMAN, MAY,
PARKER, PERSAUD, RAMOS, SANDERS -- read twice and ordered printed, and
when printed to be committed to the Committee on Commerce, Economic
Development and Small Business
AN ACT to amend the economic development law, the public authorities law
and the tax law, in relation to the establishment of a state universi-
ty-based center for employee ownership; and to repeal certain
provisions of the economic development law relating thereto
THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND ASSEM-
BLY, DO ENACT AS FOLLOWS:
Section 1. Section 104-a of the economic development law is REPEALED
and a new section 104-a is added to read as follows:
§ 104-A. ESTABLISHMENT OF A STATE UNIVERSITY-BASED CENTER FOR EMPLOYEE
OWNERSHIP. WITH RESPECT TO EMPLOYEE OWNERSHIP, THE DEPARTMENT SHALL
ESTABLISH A STATE UNIVERSITY-BASED CENTER FOR EMPLOYEE OWNERSHIP "THE
CENTER".
1. THE CENTER SHALL:
(A) PROVIDE EDUCATION AND OUTREACH TO INFORM BUSINESS OWNERS ABOUT THE
BENEFITS OF EMPLOYEE OWNERSHIP SUCCESSIONS;
(B) ORGANIZE WORKSHOPS AND CONFERENCES ON EMPLOYEE OWNERSHIP
SUCCESSIONS;
(C) PREPARE AND DISTRIBUTE MATERIALS CONCERNING EMPLOYEE OWNERSHIP
SUCCESSIONS;
(D) PROVIDE INITIAL CONSULTATION TO BUSINESS OWNERS EXPLORING THE
POSSIBILITY OF TRANSFERRING FULL OR PARTIAL OWNERSHIP TO EMPLOYEES;
(E) PROVIDE A REFERRAL SERVICE TO HELP BUSINESS OWNERS FIND LEGAL,
FINANCIAL, AND TECHNICAL ADVICE IN CONNECTION WITH EMPLOYEE OWNERSHIP
SUCCESSIONS;
(F) PARTNER WITH KEY ORGANIZATIONS, SUCH AS PROFESSIONAL AND TRADE
ASSOCIATIONS, FINANCIAL INSTITUTIONS, UNIONS, ECONOMIC DEVELOPMENT
EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD01164-01-3
S. 962 2
ORGANIZATIONS, AND OTHER NON-PROFIT ENTITIES, TO PROMOTE EMPLOYEE OWNER-
SHIP SUCCESSIONS;
(G) CONDUCT INVESTIGATIONS, RESEARCH, STUDIES, AND ANALYSES ON THE
SUBJECT OF EMPLOYEE OWNERSHIP; AND
(H) SUPPORT THE GROWTH OF ASSOCIATIONS OF EMPLOYEE-OWNED COMPANIES.
2. THE CENTER SHALL ADDITIONALLY PROVIDE SUPPORT AND ACCESS IN GOVERN-
MENT RELATIONS, INCLUDING PROVIDING ACCESS TO INFORMATION REGARDING
RULES AND REGULATIONS THAT RELATE TO EMPLOYEE OWNERSHIP AND DEVELOP
PROPOSALS FOR CHANGES IN POLICIES TO PROMOTE EMPLOYEE OWNERSHIP.
§ 2. Section 1836-a of the public authorities law, as added by chapter
788 of the laws of 1983, is amended to read as follows:
§ 1836-a. Legislative findings. The legislature hereby finds and
declares that [the health, safety and general welfare of the people of
this state are directly dependent upon the state economy, and that one
of the principal problems of our present economy is the permanent clos-
ing of industrial and manufacturing plants, and their relocation out of
state, which results in the loss of jobs and increasing unemployment.
It is the purpose of this subtitle to encourage the employees of
plants that are about to be permanently closed, or relocated, to acquire
such plants and to continue to operate them as employee-owned enter-
prises, thereby retaining the jobs that would otherwise be lost, and
strengthening the economic base of this state] EMPLOYEE OWNERSHIP
PROGRAM IS A MAINSTREAM ASPECT OF THE UNITED STATES ECONOMY WITH APPROX-
IMATELY THIRTEEN AND A HALF MILLION WORKERS PARTICIPATING IN SOME FORM
OF EMPLOYEE OWNERSHIP PROGRAM AT OVER SEVEN THOUSAND COMPANIES. THE VAST
MAJORITY OF SUCH PROGRAMS ARE THE RESULT OF A TRANSFER FROM THE BUSINESS
OWNERS TO THE EMPLOYEES AND IN ACCORDANCE WITH FEDERAL LAW THAT SEEKS TO
FACILITATE SUCH TRANSFERS. EMPLOYEE OWNERSHIP TRANSFERS ARE IN THE
INTEREST OF BUSINESS OWNERS, WHO SEEK TO LIQUIDATE THEIR OWNERSHIP
INTEREST AND RETIRE. SUCH TRANSFERS ARE ALSO IN THE INTEREST OF THE
EMPLOYEES, WHO GAIN THE OPPORTUNITY TO ENSURE THE FUTURE SURVIVAL OF THE
FIRM AND THEIR JOBS.
THE LEGISLATURE ALSO FINDS AND DECLARES THAT EMPLOYEE-OWNED BUSI-
NESSES ARE MORE PRODUCTIVE, ENJOY INCREASED SALES, LOWER TURNOVER RATE
AND GREATER LONGEVITY, OFFER BETTER EMPLOYMENT OPPORTUNITIES, AND ARE
MORE LIKELY TO RETAIN JOBS IN-STATE AND LESS LIKELY TO RELOCATE OUT-OF-
STATE. EMPLOYEE-OWNED BUSINESSES ALSO SUSTAIN THE STATE TAX BASE
THROUGH EMPLOYEE AND CORPORATE INCOME TAX, WHILE SAVING COSTS ON UNEM-
PLOYMENT INSURANCE AND OTHER STATE BENEFIT PROGRAMS. IT IS THE PURPOSE
OF THIS SUBTITLE TO AMPLIFY FEDERAL PROGRAMS IN SUPPORT OF EMPLOYEE
OWNERSHIP AT THE STATE LEVEL THROUGH LOANS AND LOAN GUARANTEES THAT
PROVIDE FINANCING FOR THE CONVERSION OF EXISTING BUSINESSES TO EMPLOYEE
OWNERSHIP.
§ 3. Subdivisions 3, 4, 5, 6, 7 and 8 of section 1836-b of the public
authorities law, subdivisions 3, 6, 7 and 8 as added by chapter 788 of
the laws of 1983, subdivisions 4 and 5 as amended by chapter 805 of the
laws of 1985, are amended to read as follows:
3. "Eligible project" means the acquisition [or rehabilitation] by an
employee ownership association of an existing [industrial or manufactur-
ing plant] BUSINESS located in this state for the purpose of operating
it as an employee-owned enterprise.
4. "Employee ownership association" means a corporation, LIMITED
LIABILITY COMPANY, TRUST, or other association formed by or on behalf of
the employees of [an industrial or manufacturing plant] A BUSINESS
located in this state for the purpose of assuming ownership or control
of the [plant] BUSINESS and operating it as an employee-owned enterprise
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or as a worker cooperative as defined in section eighty-one of the coop-
erative corporations law.
5. "Employee-owned enterprise" means a business in which the employees
are represented on the board of directors OR MANAGERS and the employees
control the majority of the voting stock OR MEMBER INTEREST, or if the
business is held in a trust which controls the majority of the voting
stock OR MEMBER INTEREST, the trustees are elected by the employees. The
term "employee-owned enterprise" shall also refer to a worker cooper-
ative as defined in section eighty-one of the cooperative corporations
law.
6. ["Funding partner" means an entity which singly or in combination
with other entities has agreed to finance a portion of the project cost
of an eligible project, and may include the employee ownership associ-
ation undertaking the project as well as any financial entity.
7. "Plant" includes the site, structure, building and equipment and
all real and personal property in connection therewith, whether or not
in existence, and may include any road, railroad, or utility or equip-
ment appurtenant thereto.
8.] "Project cost" includes all reasonable and necessary costs to be
incurred in the course of an eligible project, including [any antic-
ipated acquisition,] THE FAIR MARKET VALUE OF THE BUSINESS INTEREST TO
BE ACQUIRED, AS WELL AS COSTS FOR ANY ADDITIONAL construction, land
acquisition, improvements, equipment, pertinent rights and easements,
and associated technical, engineering, legal and financial services.
§ 4. The opening paragraph and paragraphs (a), (b) and (d) of subdivi-
sion 1 and subdivision 2 of section 1836-c of the public authorities
law, as added by chapter 788 of the laws of 1983, are amended to read as
follows:
Any employee ownership association may apply to [a local development
corporation serving the municipality in which the eligible project is
located] THE AUTHORITY for an employee ownership assistance loan to be
used to help finance an eligible project. Such application must include
a written statement from the entity from which the project is being
acquired, stating that such entity consents to the acquisition. The
application shall include [in detail]:
(a) [the history and membership] A DESCRIPTION of the EMPLOYEE OWNER-
SHIP association;
(b) [the history and circumstances of the plant to be acquired] A
DESCRIPTION OF THE BUSINESS;
(d) estimate of the number of jobs [to be saved or created by the
project] BEFORE AND AFTER THE TRANSACTION; and
2. The application shall also include a detailed financial statement
of [funding partner] ACTUAL AND ANTICIPATED FINANCIAL participation in
the project, which shall include:
(a) the identity of all funding [partners] SOURCES; [and]
(b) THE NATURE OF THE FINANCIAL PARTICIPATION, WHICH MAY INCLUDE, BUT
IS NOT LIMITED TO, SELLER NOTES, SENIOR DEBT, JUNIOR DEBT, AND EQUITY
INVESTMENT; AND
(C) the terms of the financing agreements with the funding [partners]
SOURCES, including any repayment schedules and finance charges to be
included in such agreements.
§ 5. Subdivision 1 of section 1836-d of the public authorities law, as
added by chapter 788 of the laws of 1983, is amended to read as follows:
1. have a higher level of funding from the funding [partners] SOURCE
OR FINANCIAL PARTICIPANT;
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§ 6. The section heading and subdivisions 1 and 3 of section 1836-e of
the public authorities law, as added by chapter 788 of the laws of 1983,
are amended and two new subdivisions 5 and 6 are added to read as
follows:
Loan agreements AND LENDING AUTHORITY. 1. If the authority approves
an application for a loan under this subtitle, the [local development
corporation] AUTHORITY may enter into a loan agreement with the employee
ownership association whereby the [local development corporation]
AUTHORITY agrees to loan to the employee ownership association the
remaining funds necessary for the eligible project.
3. The [local development corporation] AUTHORITY may not enter into
any loan agreement unless the authority determines through an appropri-
ate method that there is reasonable assurance of repayment. The authori-
ty shall establish such requirements or terms as it may deem necessary
or desirable to secure the repayment of the loan and to protect the
interests of the authority and the holders of its bonds.
5. (A) THE AUTHORITY MAY ESTABLISH A TRUST FUND ACCOUNT FOR THE
PURPOSES OF PROVIDING A LOAN OR LOAN GUARANTEE PURSUANT TO THE
PROVISIONS OF THIS CHAPTER. THE INITIAL DEPOSIT OF FUNDS TO THE TRUST
FUND SHALL BE IN AN AMOUNT TO BE DETERMINED BY THE AUTHORITY BUT SHALL
NOT EXCEED ONE HUNDRED MILLION DOLLARS FROM AN AMOUNT OTHERWISE AVAIL-
ABLE FROM FUNDS APPROPRIATED.
(B) THE AUTHORITY SHALL DEPOSIT INTO THE TRUST FUND ALL INCOME EARNED
FROM THE MONEYS PAID BACK FROM LOANS TO BE USED FOR ADDITIONAL LENDING.
6. THE AUTHORITY SHALL MAKE A LOAN DECISION OR LOAN GUARANTEE DECI-
SION, AND INFORM THE APPLICANT OF THE AUTHORITY'S DECISION, NO LATER
THAN THIRTY DAYS AFTER THE AUTHORITY RECEIVES THE APPLICANT'S APPLICA-
TION FOR AN EMPLOYEE OWNERSHIP LOAN OR EMPLOYEE OWNERSHIP LOAN GUARAN-
TEE. IF THE AUTHORITY REQUESTS THAT AN APPLICANT SUPPLEMENT ITS APPLICA-
TION BY SUBMITTING ADDITIONAL INFORMATION, THE AUTHORITY SHALL HAVE AN
ADDITIONAL FIFTEEN DAYS AFTER RECEIVING THE ADDITIONAL INFORMATION BY
WHICH THE AUTHORITY MUST MAKE A LOAN DECISION OR A LOAN GUARANTEE DECI-
SION AND INFORM THE APPLICANT OF THE AUTHORITY'S DECISION.
§ 7. Subsection (c) of section 612 of the tax law is amended by adding
a new paragraph 47 to read as follows:
(47) ONE HUNDRED PERCENT OF THE CAPITAL GAINS FROM THE SALE OF STOCK
OR MEMBER INTEREST FROM A NEW YORK CORPORATION OR LIMITED LIABILITY
COMPANY TO AN EMPLOYEE-OWNED ENTERPRISE, AS DEFINED IN SUBDIVISION FIVE
OF SECTION EIGHTEEN HUNDRED THIRTY-SIX-B OF THE PUBLIC AUTHORITIES LAW.
IN ORDER TO QUALIFY FOR SUCH MODIFICATION AS DESCRIBED IN THIS PARA-
GRAPH, SUCH EMPLOYEE-OWNED ENTERPRISE MUST HAVE ITS COMMERCIAL DOMICILE
IN NEW YORK. IF THE EMPLOYEE-OWNED ENTERPRISE IS AN "EMPLOYEE STOCK
OWNERSHIP PLAN," IT MUST COMPLY WITH FEDERAL REQUIREMENTS AS SUCH PLAN
IS DEFINED IN 26 U.S.C. § 4975(E)(7).
§ 8. This act shall take effect immediately; provided, however, that
section one of this act shall take effect on the one hundred eightieth
day after it shall have become a law.
