House File 2284 - Introduced HOUSE FILE 2284 BY COMMITTEE ON APPROPRIATIONS (SUCCESSOR TO HF 2203) (SUCCESSOR TO HF 2085) (SUCCESSOR TO HSB 516) A BILL FOR An Act relating to employee stock ownership plans by 1 encouraging the adoption of such plans by Iowa corporations, 2 creating an individual income tax exemption, making an 3 appropriation, and including retroactive applicability 4 provisions. 5 BE IT ENACTED BY THE GENERAL ASSEMBLY OF THE STATE OF IOWA: 6 TLSB 5250HW (3) 84 mm/sc

H.F. 2284 DIVISION I 1 ESOP FORMATION ASSISTANCE 2 Section 1. EMPLOYEE STOCK OWNERSHIP PLAN ASSISTANCE AND 3 PROMOTION. 4 1. There is appropriated from the general fund of the state 5 to the economic development authority for the fiscal year 6 beginning July 1, 2012, and ending June 30, 2013, the following 7 amount, or so much thereof as is necessary, to be used for the 8 purposes designated: 9 For providing financial assistance, including establishment 10 of a loan program, and technical assistance, marketing, and 11 education to businesses interested in establishing employee 12 stock ownership plans and for procuring the services of an 13 independent contractor with expertise in the formation of 14 employee stock ownership plans: 15 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,000,000 16 Notwithstanding section 8.33, moneys appropriated pursuant 17 to this section shall not revert but shall remain available to 18 the economic development authority for the purposes designated 19 until expended. Notwithstanding section 12C.7, subsection 2, 20 earnings or interest on moneys appropriated pursuant to this 21 section shall be retained by the economic development authority 22 and used for the purposes designated until expended. 23 2. On or before January 15, 2014, the authority shall 24 provide to the general assembly and the governor’s office a 25 report describing the expenditure of funds pursuant to this 26 section and evaluating the success of the assistance and 27 promotion program. 28 DIVISION II 29 CAPITAL GAIN DEDUCTION FOR SALE TO AN IOWA ESOP 30 Sec. 2. Section 422.7, subsection 21, Code Supplement 2011, 31 is amended by adding the following new paragraph: 32 NEW PARAGRAPH . e. (1) To the extent not already excluded, 33 the net capital gain from the sale or exchange of employer 34 securities of an Iowa corporation to a qualified Iowa employee 35 -1- LSB 5250HW (3) 84 mm/sc 1/ 3

H.F. 2284 stock ownership plan when, upon completion of the transaction, 1 the qualified Iowa employee stock ownership plan owns at least 2 thirty percent of all outstanding employer securities issued 3 by the Iowa corporation. 4 (2) For purposes of this paragraph: 5 (a) “Employer securities” means the same as defined in 6 section 409(l) of the Internal Revenue Code. 7 (b) “Iowa corporation” means a corporation whose commercial 8 domicile, as defined in section 422.32, is in this state. 9 (c) “Qualified Iowa employee stock ownership plan” means an 10 employee stock ownership plan, as defined in section 4975(e)(7) 11 of the Internal Revenue Code, and trust that are established 12 by an Iowa corporation for the benefit of the employees of the 13 corporation. 14 Sec. 3. RETROACTIVE APPLICABILITY. This division of this 15 Act applies retroactively to January 1, 2012, for tax years 16 beginning on or after that date. 17 EXPLANATION 18 This bill relates to employee stock ownership plans. 19 Division I of the bill provides for an appropriation of $1 20 million to the economic development authority for the purpose 21 of providing financial assistance, including the establishment 22 of a loan program, and technical assistance, marketing, and 23 education to businesses regarding the formation of employee 24 stock ownership plans. The economic development authority 25 is required to provide a report detailing its use of the 26 appropriation to the general assembly and the governor by 27 January 15, 2014. 28 Division II of the bill provides for an exemption from the 29 computation of the state individual income tax of the net 30 capital gain from the sale or exchange of employer securities 31 of an Iowa corporation to a qualified Iowa employee stock 32 ownership plan if, upon completion of the sale or exchange, 33 the qualified Iowa employee stock ownership plan owns at least 34 30 percent of all outstanding employer securities issued 35 -2- LSB 5250HW (3) 84 mm/sc 2/ 3

H.F. 2284 by the Iowa corporation. For purposes of the exemption, 1 “employer securities” means the same as defined in section 2 409(l) of the Internal Revenue Code, “Iowa corporation” 3 means a corporation whose commercial domicile is in Iowa, 4 and “qualified Iowa employee stock ownership plan” means an 5 employee stock ownership plan and trust that is established by 6 an Iowa corporation for the benefit of the employees of the 7 corporation. 8 Division II of the bill applies retroactively to January 1, 9 2012, for tax years beginning on or after that date. 10 -3- LSB 5250HW (3) 84 mm/sc 3/ 3