Senate File 2065 - Introduced SENATE FILE 2065 BY COMMITTEE ON ECONOMIC GROWTH/REBUILD IOWA (SUCCESSOR TO SSB 3014) 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 5250SV (2) 84 mm/sc

S.F. 2065 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 DIVISION II 24 CAPITAL GAIN DEDUCTION FOR SALE TO AN IOWA ESOP 25 Sec. 2. Section 422.7, subsection 21, Code Supplement 2011, 26 is amended by adding the following new paragraph: 27 NEW PARAGRAPH . e. (1) To the extent not already excluded, 28 the net capital gain from the sale or exchange of employer 29 securities of an Iowa corporation to a qualified Iowa employee 30 stock ownership plan when, upon completion of the transaction, 31 the qualified Iowa employee stock ownership plan owns at least 32 thirty percent of all outstanding employer securities issued 33 by the Iowa corporation. 34 (2) For purposes of this paragraph: 35 -1- LSB 5250SV (2) 84 mm/sc 1/ 3

S.F. 2065 (a) “Employer securities” means the same as defined in 1 section 409(l) of the Internal Revenue Code. 2 (b) “Iowa corporation” means a corporation whose commercial 3 domicile, as defined in section 422.32, is in this state. 4 (c) “Qualified Iowa employee stock ownership plan” means an 5 employee stock ownership plan, as defined in section 4975(e)(7) 6 of the Internal Revenue Code, and trust that are established 7 by an Iowa corporation for the benefit of the employees of the 8 corporation. 9 Sec. 3. RETROACTIVE APPLICABILITY. This division of this 10 Act applies retroactively to January 1, 2012, for tax years 11 beginning on or after that date. 12 EXPLANATION 13 This bill relates to employee stock ownership plans. 14 Division I of the bill provides for an appropriation of $1 15 million to the economic development authority for the purpose 16 of providing financial assistance, including the establishment 17 of a loan program, and technical assistance, marketing, and 18 education to businesses regarding the formation of employee 19 stock ownership plans. 20 Division II of the bill provides for an exemption from the 21 computation of the state individual income tax of the net 22 capital gain from the sale or exchange of employer securities 23 of an Iowa corporation to a qualified Iowa employee stock 24 ownership plan if, upon completion of the sale or exchange, 25 the qualified Iowa employee stock ownership plan owns at least 26 30 percent of all outstanding employer securities issued 27 by the Iowa corporation. For purposes of the exemption, 28 “employer securities” means the same as defined in section 29 409(l) of the Internal Revenue Code, “Iowa corporation” 30 means a corporation whose commercial domicile is in Iowa, 31 and “qualified Iowa employee stock ownership plan” means an 32 employee stock ownership plan and trust that is established by 33 an Iowa corporation for the benefit of the employees of the 34 corporation. 35 -2- LSB 5250SV (2) 84 mm/sc 2/ 3