April 11, 2024 - Introduced by Representatives Madison, Moore Omokunde, C.
Anderson
, Stubbs, Clancy and Bare. Referred to Committee on Ways and
Means.
AB1217,1,6 1An Act to amend 71.05 (6) (a) 15., 71.21 (4) (a), 71.26 (2) (a) 4., 71.34 (1k) (g),
271.45 (2) (a) 10. and 238.12 (1); and to create 71.05 (6) (b) 57., 71.07 (11), 71.10
3(4) (em), 71.26 (1) (j), 71.28 (11), 71.30 (3) (am), 71.45 (1) (e), 71.47 (11), 71.49
4(1) (am) and 238.309 of the statutes; relating to: creating an employee
5ownership conversion costs tax credit and an exemption for capital gains from
6the transfer of a business to employee ownership.
Analysis by the Legislative Reference Bureau
This bill creates tax incentives related to businesses in this state converting to
an employee ownership business structure.
Employee ownership conversion costs tax credit
Under the bill, the Wisconsin Economic Development Corporation may certify
a business to claim a nonrefundable income tax credit for an amount equal to 70
percent of costs related to converting the business to a worker-owned cooperative or
50 percent of the costs related to converting the business to an employee ownership
trust or an employee stock ownership plan. The credit is limited to a maximum
amount of $100,000. A business is qualified to receive the credit if the business is
subject to income and franchise taxes in this state and, at the time the business
receives the credit, is not owned in whole or in part by an employee ownership trust,
does not have an employee stock ownership plan, and is not, in whole or in part, a
worker-owned cooperative.

Capital gain exemption
The bill also creates an individual income tax subtraction and a corporate
income and franchise tax exemption for the amount of the capital gain realized from
the transfer of ownership of a business in this state to an employee stock ownership
plan, a worker-owned cooperative, or an employee ownership trust. Under the bill,
the subtraction or exemption may not be claimed for a taxable year unless the
business whose transfer results in a capital gain has entered a labor peace agreement
with the labor organization representing the employees of the business for that
taxable year.
Because this bill relates to an exemption from state or local taxes, it may be
referred to the Joint Survey Committee on Tax Exemptions for a report to be printed
as an appendix to the bill.
For further information see the state fiscal estimate, which will be printed as
an appendix to this bill.
The people of the state of Wisconsin, represented in senate and assembly, do
enact as follows:
AB1217,1 1Section 1. 71.05 (6) (a) 15. of the statutes is amended to read:
AB1217,2,72 71.05 (6) (a) 15. The amount of the credits computed under s. 71.07 (2dm),
3(2dx), (2dy), (3g), (3h), (3n), (3q), (3s), (3t), (3w), (3wm), (3y), (4k), (4n), (5e), (5i), (5j),
4(5k), (5r), (5rm), (6n), and (10), and (11) and not passed through by a partnership,
5limited liability company, or tax-option corporation that has added that amount to
6the partnership's, company's, or tax-option corporation's income under s. 71.21 (4)
7or 71.34 (1k) (g).
AB1217,2 8Section 2. 71.05 (6) (b) 57. of the statutes is created to read:
AB1217,2,139 71.05 (6) (b) 57. a. For taxable years beginning after December 31, 2023, to the
10extent otherwise included in Wisconsin taxable income if not for this subdivision, the
11amount of the capital gain as computed under the Internal Revenue Code from the
12transfer of ownership of a business in this state to an employee stock ownership plan,
13a worker-owned cooperative, or an employee ownership trust.
AB1217,3,4
1b. No modification may be claimed under this subdivision unless an employee
2stock ownership plan, worker-owned cooperative, or employee ownership trust owns
3more than 50 percent of the business whose transfer results in a capital gain
4described in subd. 57. a.
AB1217,3,85 c. No modification may be claimed for a taxable year under this subdivision
6unless the business whose transfer results in a capital gain described in subd. 57. a.
7has entered a labor peace agreement, as defined in s. 238.309 (1) (d), with the labor
8organization representing the employees of the business for the taxable year.
AB1217,3,109 d. In this subdivision, “employee ownership trust” has the meaning given in s.
10238.309 (1) (b).
AB1217,3,1211 e. In this subdivision, “employee stock ownership plan” has the meaning given
12in 26 USC 4975 (e) (7).
AB1217,3,1413 f. In this subdivision, “worker-owned cooperative” has the meaning given for
14“eligible worker-owned cooperative” in 26 USC 1042 (c) (2).
AB1217,3 15Section 3. 71.07 (11) of the statutes is created to read:
AB1217,3,1716 71.07 (11) Employee ownership conversion costs credit. (a) Definitions. In
17this subsection:
AB1217,3,2018 1. “Claimant” means a person that owns an interest in a qualified business
19prior to its conversion to a employee ownership trust, employee stock ownership
20plan, or worker-owned cooperative and that files a claim under this subsection.
AB1217,3,2121 2. “Conversion costs” has the meaning given in s. 238.309 (1) (a).
AB1217,3,2222 3. “Employee ownership trust” has the meaning given in s. 238.309 (1) (b).
AB1217,3,2423 4. “Employee stock ownership plan” has the meaning given in 26 USC 4975 (e)
24(7).
AB1217,3,2525 5. “Qualified business” has the meaning given in s. 238.309 (1) (e).
AB1217,4,2
16. “Worker-owned cooperative” has the meaning given for “eligible
2worker-owned cooperative” in 26 USC 1042 (c) (2).
AB1217,4,83 (b) Filing claims. For taxable years beginning after December 31, 2023, and
4subject to the limitations provided in this subsection, a claimant may claim as a
5credit against the tax imposed under s. 71.02 for the taxable year during which a
6conversion to a employee ownership trust, employee stock ownership plan, or
7worker-owned cooperative is complete, up to the amount of those taxes, all of the
8following:
AB1217,4,109 1. An amount equal to 70 percent of the conversion costs, up to $100,000,
10incurred by a qualified business for converting to a worker-owned cooperative.
AB1217,4,1311 2. An amount equal to 50 percent of the conversion costs, up to $100,000,
12incurred by a qualified business for converting to an employee ownership trust or an
13employee stock ownership plan.
AB1217,4,1714 (c) Limitations. 1. No credit is allowed under this subsection for a taxable year
15if the qualified business has not entered into a labor peace agreement, as defined in
16s. 238.309 (1) (d), with the labor organization representing the employees of the
17business for the taxable year.
AB1217,4,2318 2. No credit may be allowed under this subsection unless the claimant files an
19application with the Wisconsin Economic Development Corporation, at the time and
20in the manner prescribed by the Wisconsin Economic Development Corporation, and
21the Wisconsin Economic Development Corporation approves the application. The
22claimant shall submit a copy of the certification under s. 238.309 (3) with the
23claimant's return.
AB1217,5,524 3. Partnerships, limited liability companies, and tax-option corporations may
25not claim the credit under this subsection, but the eligibility for and the amount of

1the credit are based on the amounts paid by the entities under par. (b). A
2partnership, limited liability company, or tax-option corporation shall compute the
3amount of the credit that each of its partners, members, or shareholders may claim
4and shall provide that information to each of them. Partners, members, and
5shareholders may claim the credit in proportion to their ownership interests.
AB1217,5,76 (d) Administration. Section 71.28 (4) (e) to (h), as it applies to the credit under
7s. 71.28 (4), applies to the credit under this subsection.
AB1217,4 8Section 4. 71.10 (4) (em) of the statutes is created to read:
AB1217,5,99 71.10 (4) (em) Employee ownership conversion costs credit under s. 71.07 (11).
AB1217,5 10Section 5. 71.21 (4) (a) of the statutes is amended to read:
AB1217,5,1411 71.21 (4) (a) The amount of the credits computed by a partnership under s.
1271.07 (2dm), (2dx), (2dy), (3g), (3h), (3n), (3q), (3s), (3t), (3w), (3wm), (3y), (4k), (4n),
13(5e), (5g), (5i), (5j), (5k), (5r), (5rm), (6n), and (10), and (11) and passed through to
14partners shall be added to the partnership's income.
AB1217,6 15Section 6. 71.26 (1) (j) of the statutes is created to read:
AB1217,5,1916 71.26 (1) (j) Capital gain from transfer of business to employee ownership. 1.
17The amount of the capital gain as computed under the Internal Revenue Code from
18the transfer of ownership of a business in this state to an employee stock ownership
19plan, a worker-owned cooperative, or an employee ownership trust.
AB1217,5,2320 2. The exemption under this paragraph does not apply unless an employee
21stock ownership plan, worker-owned cooperative, or employee ownership trust owns
22more than 50 percent of the business whose transfer results in a capital gain
23described in subd. 1.
AB1217,6,224 3. The exemption under this paragraph does not apply for a taxable year unless
25the business whose transfer results in a capital gain described in subd. 1. has entered

1a labor peace agreement, as defined in s. 238.309 (1) (d), with the labor organization
2representing the employees of the business for the taxable year.
AB1217,6,43 4. In this paragraph, “employee ownership trust” has the meaning given in s.
4238.309 (1) (b).
AB1217,6,65 5. In this paragraph, “employee stock ownership plan” has the meaning given
6in 26 USC 4975 (e) (7).
AB1217,6,87 6. In this paragraph, “worker-owned cooperative” has the meaning given for
8“eligible worker-owned cooperative” in 26 USC 1042 (c) (2).
AB1217,7 9Section 7. 71.26 (2) (a) 4. of the statutes is amended to read:
AB1217,6,1510 71.26 (2) (a) 4. Plus the amount of the credit computed under s. 71.28 (1dm),
11(1dx), (1dy), (3g), (3h), (3n), (3q), (3t), (3w), (3wm), (3y), (5e), (5g), (5i), (5j), (5k), (5r),
12(5rm), (6n), and (10), and (11) and not passed through by a partnership, limited
13liability company, or tax-option corporation that has added that amount to the
14partnership's, limited liability company's, or tax-option corporation's income under
15s. 71.21 (4) or 71.34 (1k) (g).
AB1217,8 16Section 8. 71.28 (11) of the statutes is created to read:
AB1217,6,1817 71.28 (11) Employee ownership conversion costs credit. (a) Definitions. In
18this subsection:
AB1217,6,2119 1. “Claimant” means a person that owns an interest in a qualified business
20prior to its conversion to a employee ownership trust, employee stock ownership
21plan, or worker-owned cooperative and that files a claim under this subsection.
AB1217,6,2222 2. “Conversion costs” has the meaning given in s. 238.309 (1) (a).
AB1217,6,2323 3. “Employee ownership trust” has the meaning given in s. 238.309 (1) (b).
AB1217,6,2524 4. “Employee stock ownership plan” has the meaning given in 26 USC 4975 (e)
25(7).
AB1217,7,1
15. “Qualified business” has the meaning given in s. 238.309 (1) (e).
AB1217,7,32 6. “Worker-owned cooperative” has the meaning given for “eligible
3worker-owned cooperative” in 26 USC 1042 (c) (2).
AB1217,7,94 (b) Filing claims. For taxable years beginning after December 31, 2023, and
5subject to the limitations provided in this subsection, a claimant may claim as a
6credit against the tax imposed under s. 71.23 for the taxable year during which a
7conversion to a employee ownership trust, employee stock ownership plan, or
8worker-owned cooperative is complete, up to the amount of those taxes, all of the
9following:
AB1217,7,1110 1. An amount equal to 70 percent of the conversion costs, up to $100,000,
11incurred by a qualified business for converting to a worker-owned cooperative.
AB1217,7,1412 2. An amount equal to 50 percent of the conversion costs, up to $100,000,
13incurred by a qualified business for converting to an employee ownership trust or an
14employee stock ownership plan.
AB1217,7,1815 (c) Limitations. 1. No credit is allowed under this subsection for a taxable year
16if the qualified business has not entered into a labor peace agreement, as defined in
17s. 238.309 (1) (d), with the labor organization representing the employees of the
18business for the taxable year.
AB1217,7,2419 2. No credit may be allowed under this subsection unless the claimant files an
20application with the Wisconsin Economic Development Corporation, at the time and
21in the manner prescribed by the Wisconsin Economic Development Corporation, and
22the Wisconsin Economic Development Corporation approves the application. The
23claimant shall submit a copy of the certification under s. 238.309 (3) with the
24claimant's return.
AB1217,8,7
13. Partnerships, limited liability companies, and tax-option corporations may
2not claim the credit under this subsection, but the eligibility for and the amount of
3the credit are based on the amounts paid by the entities under par. (b). A
4partnership, limited liability company, or tax-option corporation shall compute the
5amount of the credit that each of its partners, members, or shareholders may claim
6and shall provide that information to each of them. Partners, members, and
7shareholders may claim the credit in proportion to their ownership interests.
AB1217,8,98 (d) Administration. Subsection (4) (e) to (h), as it applies to the credit under
9sub. (4), applies to the credit under this subsection.
AB1217,9 10Section 9. 71.30 (3) (am) of the statutes is created to read:
AB1217,8,1111 71.30 (3) (am) Employee ownership conversion costs credit under s. 71.28 (11).
AB1217,10 12Section 10. 71.34 (1k) (g) of the statutes is amended to read:
AB1217,8,1613 71.34 (1k) (g) An addition shall be made for credits computed by a tax-option
14corporation under s. 71.28 (1dm), (1dx), (1dy), (3), (3g), (3h), (3n), (3q), (3t), (3w),
15(3wm), (3y), (4), (5), (5e), (5g), (5i), (5j), (5k), (5r), (5rm), (6n), and (10), and (11) and
16passed through to shareholders.
AB1217,11 17Section 11. 71.45 (1) (e) of the statutes is created to read:
AB1217,8,2118 71.45 (1) (e) 1. The amount of the capital gain as computed under the Internal
19Revenue Code from the transfer of ownership of a business in this state to an
20employee stock ownership plan, a worker-owned cooperative, or an employee
21ownership trust.
AB1217,8,2522 2. The exemption under this paragraph does not apply unless an employee
23stock ownership plan, worker-owned cooperative, or employee ownership trust owns
24more than 50 percent of the business whose transfer results in a capital gain
25described in subd. 1.
AB1217,9,4
13. The exemption under this paragraph does not apply for a taxable year unless
2the business whose transfer results in a capital gain described in subd. 1. has entered
3a labor peace agreement, as defined in s. 238.309 (1) (d), with the labor organization
4representing the employees of the business for the taxable year.
AB1217,9,65 4. In this paragraph, “employee ownership trust” has the meaning given in s.
6238.309 (1) (b).
AB1217,9,87 5. In this paragraph, “employee stock ownership plan” has the meaning given
8in 26 USC 4975 (e) (7).
AB1217,9,109 6. In this paragraph, “worker-owned cooperative” has the meaning given for
10“eligible worker-owned cooperative” in 26 USC 1042 (c) (2).
AB1217,12 11Section 12. 71.45 (2) (a) 10. of the statutes is amended to read:
AB1217,9,1812 71.45 (2) (a) 10. By adding to federal taxable income the amount of credit
13computed under s. 71.47 (1dm) to (1dy), (3g), (3h), (3n), (3q), (3w), (3y), (5e), (5g), (5i),
14(5j), (5k), (5r), (5rm), (6n), and (10), and (11) and not passed through by a partnership,
15limited liability company, or tax-option corporation that has added that amount to
16the partnership's, limited liability company's, or tax-option corporation's income
17under s. 71.21 (4) or 71.34 (1k) (g) and the amount of credit computed under s. 71.47
18(3), (3t), (4), (4m), and (5).
AB1217,13 19Section 13. 71.47 (11) of the statutes is created to read:
AB1217,9,2120 71.47 (11) Employee ownership conversion costs credit. (a) Definitions. In
21this subsection:
AB1217,9,2422 1. “Claimant” means a person that owns an interest in a qualified business
23prior to its conversion to a employee ownership trust, employee stock ownership
24plan, or worker-owned cooperative and that files a claim under this subsection.
AB1217,9,2525 2. “Conversion costs” has the meaning given in s. 238.309 (1) (a).
AB1217,10,1
13. “Employee ownership trust” has the meaning given in s. 238.309 (1) (b).
AB1217,10,32 4. “Employee stock ownership plan” has the meaning given in 26 USC 4975 (e)
3(7).
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