Washington Employee Ownership Program (WA-EOP)

• Statutory language – S.B. 5096
• Final Bill summary – 5096-S SBR FBR 23

To complete what tasks Commerce has been entrusted with, the agency will:

• Create the WA-EOP:  As outlined in RCW 43.330.590, the program will have a dedicated Program Manager responsible for providing outreach and technical services to promote Employee Stock Ownership Plans (ESOPs), worker cooperatives, and employee ownership trusts (EOTs).
• Establish an Employee Ownership Commission: An eleven member commission of appointees will be established to oversee the program, representing a wide range of stakeholders, including members from the state legislature, private industry, and the private sector, as specified in RCW 43.330.592.
• Implement a Tax Credit: A feasibility assessment will be conducted, followed by the implementation of a tax credit for ESOPs, worker cooperatives, and EOTs. This tax credit will cover up to 50% of the first $100,000 for ESOPs and $25,000 for worker cooperatives and EOTs, with an annual cap of $2 million.
• Create a Revolving Loan Fund: If federal funds become available, Commerce will create a revolving loan fund to provide financial support for ESOP and worker cooperative conversion transactions. The State Small Business Credit Initiative (SSBCI) program could potentially be used for this loan fund.

• The WA Employee Ownership Program is housed within the Office of Economic Development an Competitiveness, part of the Department of Commerce. This program falls under the Small Business Finance and Community Support division and operates under the leadership of Linda Womack.
• In May 2024, the WA Employee Ownership Program held its inaugural meeting, appointing Mr. Joey Nestegard as Chair and Mr. John McNamara as Vice Chair.
• In February 2024, Lorena Lowell was hired as the Program Manager for the WA Employee Ownership Program.
• The Program Manager is currently developing a network of national and state agencies, as well as for-profit and non-profit organizations, with the goal of maximizing the use of existing resources and support systems. The ultimate aim is to create a referral system that leverages these established resources.
• The Program Manager is identifying challenges and opportunities for current, newly formed, and future employee ownership structures in Washington State. The goal is to create a network of technical assistance providers and resources to support these businesses.
• A registration system is being developed to maintain an accessible and accurate inventory of any EOP structures in the state

Employee ownership refers to an arrangement in which no one person has the most shares or control over an organization. Some of the most common forms of employee ownership include Employee Stock Ownership Plans (ESOPs), Employee Ownership Trusts (EOTs), and Cooperatives (Co-Ops).

• Employee Stock Ownership Plans (ESOPs) are recognized under federal tax law as qualified defined contribution retirement plans. An ESOP must be designed to invest primarily in qualifying employer securities and meet certain other requirements. The IRS and the United States Department of Labor share jurisdiction over some ESOP features.
• Cooperatives (Co-ops) are member-owned business entities in which worker-owners have a controlling interest, and who elect the governing body on a one-member-one-vote basis.
• Employee Ownership Trusts (EOTs) are not recognized as retirement plans under federal law. An EOT is a perpetual trust, in which employees may receive certain financial benefits and governance rights.

Qualifications

For this program, Employee-owned business means:

1. An employee cooperative established under chapters 78 RCW, 23.86 RCW, 23.100 RCW, or 24.06 RCW that has at least 50% of its board of directors consisting of, and elected by its employees; or
2. An entity owned in whole or in part by employee stock ownership plans as defined in 26 U.S.C. Sec. 4975(e)(7).
3. “Qualified business” means a person subject to tax under Title 82 RCW, including but not limited to a C corporation, S corporation, limited liability company, partnership, limited liability partnership, sole proprietorship, or other similar pass-through entity, that is not owned in whole or in part by an employee ownership trust, that does not have an employee stock ownership plan, or that is not, in whole or in part, a worker-owned cooperative.
4. Program support shall only be made available to businesses headquartered in Washington State. For the purposes of this section, “headquartered in Washington State” means that Washington State is its principal place of business or the state where it is incorporated.

There are many things to consider when creating an employee ownership structure, no matter the type of business model you choose. Along with our support, we offer these resources on your journey to learn whether employee ownership is right for you. The website links listed below are for informational purposes only. These resources are not an endorsement by the Washington State Department of Commerce or the Employee Ownership Program.

Washington State Agencies

• The Governor’s Office for Regulatory Information and Assistance — ORIA offers comprehensive information on doing business in Washington and linking entrepreneurs and small businesses to Washington state resources
• Department of Revenue — Department of Revenue (DOR) oversees and provides technical assistance to businesses applying for the tax incentive credit.
• Secretary of State — The Secretary of State oversees registering corporations, partnerships, LLCs, and other business entities, as well as managing filings related to trademarks and charities.
• Department of Labor & Industries Small Business Assistance Division — L&I is dedicated to the safety, health, and security of Washington’s 3.3 million workers.

Washington State organizations dedicated to employee-owned businesses

• Washington Center for Employee Ownership – WCEO is a nonprofit organization dedicated to promoting and supporting employee ownership across Washington State. It serves as a resource hub for business owners, employees, and other stakeholders interested in transitioning businesses to employee ownership models, such as Employee Stock Ownership Plans (ESOPs) and worker cooperatives
• Greater Washington Center for Employee Ownership – GWCEO is a regional nonprofit organization focused on promoting and facilitating employee ownership in the Greater Washington region, which may encompass parts of Washington State, the broader Pacific Northwest, or other areas depending on the organization’s specific reach.
• Employee Stock Ownership Program Association, NW Chapter – ESOP is a regional branch of the national ESOP Association, a nonprofit organization dedicated to promoting employee ownership through Employee Stock Ownership Plans (ESOPs). The Northwest Chapter serves members in Alaska, Idaho, Montana, Oregon, and Washington, providing support, education, and networking opportunities for companies and professionals involved in ESOPs.
• Northwest Cooperative Development Center – NWCDC is a nonprofit organization dedicated to cooperative businesses in the Pacific Northwest. Based in Olympia, Washington, NWCDC provides a range of services and support to help establish and strengthen cooperatives, including worker-owned cooperatives, and others, such as consumers, housing communities and, agriculture.

Other Washington State business-focused organizations

• Washington Small Business Development Center – WA SBDC is a statewide network that provides no-cost, confidential business advising, training, and resources to entrepreneurs and small business owners. It is a partnership between Washington State University, the U.S. Small Business Administration (SBA), and other local and regional entities.
• SCORE – This is a nonprofit organization dedicated to helping entrepreneurs and business owners start, grow or successfully exit a business. It is supported by the U.S. Small Business Administration (SBA) and is one of the largest networks of volunteer business mentors in the United States.

Federal agencies

• Employee Benefits Security Administration, Division of Employee Ownership – The Division of Employee Ownership is within the Office of Outreach, Education and Assistance at the U.S. Department of Labor’s Employee Benefits Security Administration (EBSA). It supports employee ownership programs across the United States, serving as a clearinghouse on techniques employed by State programs and disseminating information relating to those techniques to the programs. Email the division with any questions.

National employee-owned business organizations

• Employee Ownership Foundation – EOF supports research, education, and outreach initiatives to promote employee ownership. It funds studies on the economic impact of ESOPs and works closely with the ESOP Association to increase awareness of the benefits of EO models. They are the parent organization of the Employee Stock Ownership Foundation.
• National Center for Employee Ownership – NCEO is one of the most comprehensive resources for EO information, offering research, publications, webinars, and conferences. It provides guidance on ESOPs, worker cooperatives, and other forms of employee ownership, making it an essential hub for companies, policymakers, and practitioners.
• Employee Ownership Expansion Network – EOX is dedicated to expanding employee ownership in the United States. EOEN works with business owners, policymakers, and other stakeholders to promote employee ownership and to remove barriers to employee-owned businesses. Their efforts include advocacy, education, and providing resources to businesses looking to transition to employee ownership.
• Employee-Owned S Corporation of America – ESCA represents the interests of S corporation Employee Stock Ownership Plans (S ESOPs) in the United States. Founded in 1998, ESCA advocates for policies that promote and protect the S ESOP business model, which allows employees to collectively own businesses through their retirement plans.
• Project Equity – This organization helps businesses transition to employee ownership, particularly through worker cooperatives and ESOPs. It provides direct support to companies, promotes policy initiatives to encourage EO, and works with communities to foster employee-owned business models
• US Federation of Worker Cooperatives – The USFWC is the only national organization dedicated to promoting worker cooperatives. It provides resources, advocacy, and support for cooperatives and worker-owned businesses, advocating for policies that encourage employee ownership and provide cooperative support services.
• National Cooperative Business Association – NCBA CLUSA represents cooperative business entities, including worker cooperatives. It advocates for cooperative-friendly policies, provides education and training, and works to expand the visibility of cooperatives as a business model.

Other business-focused national organizations

• Rutgers Employee Ownership and Profit Sharing  Online Education Program – Based at Rutgers University, this institute conducts research on the impact of employee ownership and profit-sharing models. It publishes studies, hosts conferences, and provides data that support the employee ownership field.