Last week, I was fortunate to get to launch a major educational campaign with Governor Terry Branstad in the state of Iowa. While the specifics on the campaign are not important to most of you, you will most likely find what led up to it interesting.
Over the past two legislative sessions, Iowa has passed bipartisan bills that promote the growth of employee stock ownership plans (ESOPs) in the state. Specifically:
- Two-years ago legislation was passed that allows a selling owner to exempt from state capital gains tax 50 percent of the sale proceeds, if certain conditions are met. This has the effect of making a sale to an ESOP more attractive than an otherwise similar sale to a third party.
- In the last legislative session, a fund was created that will help offset the cost of determining if an ESOP is feasible for a company. This reduces an upfront cost and will hopefully make more selling owners consider the ESOP as an option.
So, why would Iowa encourage the growth of ESOPs? ESOPs are viewed as part of the state’s economic development activities (these programs are administered through the Iowa Economic Development Authority). Although there are no guarantees, ESOPs are more likely to stay in the local communities where their employee owners reside. They are also more likely to invest and grow in those communities as well.
These were some of the key messages that leaders at Timberline Manufacturing shared during the press conference. Mark Kraus from Timberline stated that they were interested in the ESOP because “We wanted to keep the company in Marion.” Their employees seemed to share that same sentiment given their response. You can learn more about Timberline here.
In previous blog posts, I have explored why ESOPs can be good for business owners, companies and employees. As Iowa has demonstrated, ESOPs are also good for states and are a very cost effective way for a state to invest in job retention and creation. If you would like more information about the specific ESOP benefits in Iowa you can view them here.
In addition to blogging here, I also tweet regularly about topics of interest to ESOPs. Click to follow me on Twitter – @jlripperger.
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