The New York State Senate

                    S T A T E   O F   N E W   Y O R K
________________________________________________________________________

                                  5685

                       2017-2018 Regular Sessions

                            I N  S E N A T E

                             April 25, 2017
                               ___________

Introduced  by  Sen.  BAILEY -- read twice and ordered printed, and when
  printed to be committed to the Committee on Commerce, Economic  Devel-
  opment and Small Business

AN  ACT  to  amend  the economic development law, the public authorities
  law, the education law and the tax law, in relation to the  establish-
  ment of a state university-based center for employee ownership; and to
  repeal  certain  provisions  of  the economic development law relating
  thereto

  THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND  ASSEM-
BLY, DO ENACT AS FOLLOWS:

  Section  1.  Section 104-a of the economic development law is REPEALED
and a new section 104-a is added to read as follows:
  § 104-A. ESTABLISHMENT OF A STATE UNIVERSITY-BASED CENTER FOR EMPLOYEE
OWNERSHIP. WITH RESPECT TO  EMPLOYEE  OWNERSHIP,  THE  DEPARTMENT  SHALL
ESTABLISH  A  STATE  UNIVERSITY-BASED CENTER FOR EMPLOYEE OWNERSHIP "THE
CENTER".
  1. THE CENTER SHALL:
  (A) PROVIDE EDUCATION AND OUTREACH TO INFORM BUSINESS OWNERS ABOUT THE
BENEFITS OF EMPLOYEE OWNERSHIP SUCCESSIONS;
  (B)  ORGANIZE  WORKSHOPS  AND  CONFERENCES   ON   EMPLOYEE   OWNERSHIP
SUCCESSIONS;
  (C)  PREPARE  AND  DISTRIBUTE  MATERIALS CONCERNING EMPLOYEE OWNERSHIP
SUCCESSIONS;
  (D) PROVIDE INITIAL CONSULTATION  TO  BUSINESS  OWNERS  EXPLORING  THE
POSSIBILITY OF TRANSFERRING FULL OR PARTIAL OWNERSHIP TO EMPLOYEES;
  (E)  PROVIDE  A  REFERRAL  SERVICE TO HELP BUSINESS OWNERS FIND LEGAL,
FINANCIAL, AND TECHNICAL ADVICE IN CONNECTION  WITH  EMPLOYEE  OWNERSHIP
SUCCESSIONS;
  (F)  PARTNER  WITH  KEY  ORGANIZATIONS, SUCH AS PROFESSIONAL AND TRADE
ASSOCIATIONS,  FINANCIAL  INSTITUTIONS,  UNIONS,  ECONOMIC   DEVELOPMENT

 EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                      [ ] is old law to be omitted.
                                                           LBD11177-02-7

S. 5685                             2

ORGANIZATIONS, AND OTHER NON-PROFIT ENTITIES, TO PROMOTE EMPLOYEE OWNER-
SHIP SUCCESSIONS;
  (G)  CONDUCT  INVESTIGATIONS,  RESEARCH,  STUDIES, AND ANALYSES ON THE
SUBJECT OF EMPLOYEE OWNERSHIP; AND
  (H) SUPPORT THE GROWTH OF ASSOCIATIONS OF EMPLOYEE-OWNED COMPANIES.
  2. THE CENTER SHALL ADDITIONALLY PROVIDE SUPPORT AND ACCESS IN GOVERN-
MENT RELATIONS, INCLUDING  PROVIDING  ACCESS  TO  INFORMATION  REGARDING
RULES  AND  REGULATIONS  THAT  RELATE  TO EMPLOYEE OWNERSHIP AND DEVELOP
PROPOSALS FOR CHANGES IN POLICIES TO PROMOTE EMPLOYEE OWNERSHIP.
  § 2. Section 1836-a of the public authorities law, as added by chapter
788 of the laws of 1983, is amended to read as follows:
  § 1836-a. Legislative  findings.  The  legislature  hereby  finds  and
declares  that  [the health, safety and general welfare of the people of
this state are directly dependent upon the state economy, and  that  one
of  the principal problems of our present economy is the permanent clos-
ing of industrial and manufacturing plants, and their relocation out  of
state, which results in the loss of jobs and increasing unemployment.
  It  is  the  purpose  of  this  subtitle to encourage the employees of
plants that are about to be permanently closed, or relocated, to acquire
such plants and to continue to operate  them  as  employee-owned  enter-
prises,  thereby  retaining  the  jobs that would otherwise be lost, and
strengthening the  economic  base  of  this  state]  EMPLOYEE  OWNERSHIP
PROGRAM IS A MAINSTREAM ASPECT OF THE UNITED STATES ECONOMY WITH APPROX-
IMATELY  THIRTEEN  AND A HALF MILLION WORKERS PARTICIPATING IN SOME FORM
OF EMPLOYEE OWNERSHIP PROGRAM AT OVER SEVEN THOUSAND COMPANIES. THE VAST
MAJORITY OF SUCH PROGRAMS ARE THE RESULT OF A TRANSFER FROM THE BUSINESS
OWNERS TO THE EMPLOYEES AND IN ACCORDANCE WITH FEDERAL LAW THAT SEEKS TO
FACILITATE SUCH TRANSFERS.  EMPLOYEE  OWNERSHIP  TRANSFERS  ARE  IN  THE
INTEREST  OF  BUSINESS  OWNERS,  WHO  SEEK  TO LIQUIDATE THEIR OWNERSHIP
INTEREST AND RETIRE. SUCH TRANSFERS ARE ALSO  IN  THE  INTEREST  OF  THE
EMPLOYEES, WHO GAIN THE OPPORTUNITY TO ENSURE THE FUTURE SURVIVAL OF THE
FIRM AND THEIR JOBS.
  THE  LEGISLATURE  ALSO  FINDS AND DECLARES   THAT EMPLOYEE-OWNED BUSI-
NESSES ARE MORE PRODUCTIVE, ENJOY INCREASED SALES, LOWER  TURNOVER  RATE
AND  GREATER  LONGEVITY,  OFFER BETTER EMPLOYMENT OPPORTUNITIES, AND ARE
MORE LIKELY TO RETAIN JOBS IN-STATE AND LESS LIKELY TO RELOCATE  OUT-OF-
STATE.    EMPLOYEE-OWNED  BUSINESSES  ALSO  SUSTAIN  THE  STATE TAX BASE
THROUGH EMPLOYEE AND CORPORATE INCOME TAX, WHILE SAVING COSTS  ON  UNEM-
PLOYMENT  INSURANCE  AND OTHER STATE BENEFIT PROGRAMS. IT IS THE PURPOSE
OF THIS SUBTITLE TO AMPLIFY FEDERAL  PROGRAMS  IN  SUPPORT  OF  EMPLOYEE
OWNERSHIP  AT  THE  STATE  LEVEL  THROUGH LOANS AND LOAN GUARANTEES THAT
PROVIDE FINANCING FOR THE CONVERSION OF EXISTING BUSINESSES TO  EMPLOYEE
OWNERSHIP.
  §  3.  Subdivision 3, 4, 5, 6, 7 and 8 of section 1836-b of the public
authorities law, subdivision 3, 6, 7 and 8 as added by 788 of  the  laws
of  1983,  subdivisions 4 and 5 as amended by chapter 805 of the laws of
1985, are amended to read as follows:
  3. "Eligible project" means the acquisition [or rehabilitation] by  an
employee ownership association of an existing [industrial or manufactur-
ing  plant]  BUSINESS located in this state for the purpose of operating
it as an employee-owned enterprise.
  4. "Employee  ownership  association"  means  a  corporation,  LIMITED
LIABILITY COMPANY, TRUST, or other association formed by or on behalf of
the  employees  of  [an  industrial  or  manufacturing plant] A BUSINESS
located in this state for the purpose of assuming ownership  or  control
of the [plant] BUSINESS and operating it as an employee-owned enterprise

S. 5685                             3

or as a worker cooperative as defined in section eighty-one of the coop-
erative corporations law.
  5. "Employee-owned enterprise" means a business in which the employees
are  represented on the board of directors OR MANAGERS and the employees
control the majority of the voting stock OR MEMBER INTEREST, or  if  the
business  is  held  in a trust which controls the majority of the voting
stock OR MEMBER INTEREST, the trustees are elected by the employees. The
term "employee-owned enterprise" shall also refer to  a  worker  cooper-
ative  as  defined in section eighty-one of the cooperative corporations
law.
  6. ["Funding partner" means an entity which singly or  in  combination
with  other entities has agreed to finance a portion of the project cost
of an eligible project, and may include the employee  ownership  associ-
ation undertaking the project as well as any financial entity.
  7.  "Plant"  includes  the site, structure, building and equipment and
all real and personal property in connection therewith, whether  or  not
in  existence,  and may include any road, railroad, or utility or equip-
ment appurtenant thereto.
  8.] "Project cost" includes all reasonable and necessary costs  to  be
incurred  in  the  course  of an eligible project, including [any antic-
ipated acquisition,] THE FAIR MARKET VALUE OF THE BUSINESS  INTEREST  TO
BE  ACQUIRED,  AS  WELL  AS  COSTS FOR ANY ADDITIONAL construction, land
acquisition, improvements, equipment, pertinent  rights  and  easements,
and associated technical, engineering, legal and financial services.
  § 4. The opening paragraph and paragraphs (a), (b) and (d) of subdivi-
sion  1  and  subdivision  2 of section 1836-c of the public authorities
law, as added by chapter 788 of the laws of 1983, are amended to read as
follows:
  Any employee ownership association may apply to [a  local  development
corporation  serving  the  municipality in which the eligible project is
located] THE AUTHORITY for an employee ownership assistance loan  to  be
used  to help finance an eligible project. Such application must include
a written statement from the entity from  which  the  project  is  being
acquired,  stating  that  such  entity  consents to the acquisition. The
application shall include [in detail]:
  (a) [the history and membership] A DESCRIPTION of the EMPLOYEE  OWNER-
SHIP association;
  (b)  [the  history  and  circumstances  of the plant to be acquired] A
DESCRIPTION OF THE BUSINESS;
  (d) estimate of the number of jobs [to be  saved  or  created  by  the
project] BEFORE AND AFTER THE TRANSACTION; and
  2.  The  application shall also include a detailed financial statement
of [funding partner] ACTUAL AND ANTICIPATED FINANCIAL  participation  in
the project, which shall include:
  (a) the identity of all funding [partners] SOURCES; [and]
  (b)  THE NATURE OF THE FINANCIAL PARTICIPATION, WHICH MAY INCLUDE, BUT
IS NOT LIMITED TO, SELLER NOTES, SENIOR DEBT, JUNIOR  DEBT,  AND  EQUITY
INVESTMENT; AND
  (C)  the terms of the financing agreements with the funding [partners]
SOURCES, including any repayment schedules and  finance  charges  to  be
included in such agreements.
  § 5. Subdivision 1 of section 1836-d of the public authorities law, as
added by chapter 788 of the laws of 1983, is amended to read as follows:
  1.  have  a higher level of funding from the funding [partners] SOURCE
OR FINANCIAL PARTICIPANT;

S. 5685                             4

  § 6. The section heading and subdivisions 1 and 3 of section 1836-e of
the public authorities law, as added by chapter 788 of the laws of 1983,
are amended and two new subdivisions 5  and  6  are  added  to  read  as
follows:
  Loan  agreements  AND LENDING AUTHORITY.  1. If the authority approves
an application for a loan under this subtitle,  the  [local  development
corporation] AUTHORITY may enter into a loan agreement with the employee
ownership   association  whereby  the  [local  development  corporation]
AUTHORITY agrees to loan  to  the  employee  ownership  association  the
remaining funds necessary for the eligible project.
  3.  The  [local  development corporation] AUTHORITY may not enter into
any loan agreement unless the authority determines through an  appropri-
ate method that there is reasonable assurance of repayment. The authori-
ty  shall  establish such requirements or terms as it may deem necessary
or desirable to secure the repayment of the  loan  and  to  protect  the
interests of the authority and the holders of its bonds.
  5.  (A)  THE  AUTHORITY  MAY  ESTABLISH  A  TRUST FUND ACCOUNT FOR THE
PURPOSES  OF  PROVIDING  A  LOAN  OR  LOAN  GUARANTEE  PURSUANT  TO  THE
PROVISIONS  OF  THIS  CHAPTER. THE INITIAL DEPOSIT OF FUNDS TO THE TRUST
FUND SHALL BE IN AN AMOUNT TO BE DETERMINED BY THE AUTHORITY  BUT  SHALL
NOT  EXCEED  ONE HUNDRED MILLION DOLLARS FROM AN AMOUNT OTHERWISE AVAIL-
ABLE FROM FUNDS APPROPRIATED.
  (B) THE AUTHORITY SHALL DEPOSIT INTO THE TRUST FUND ALL INCOME  EARNED
FROM THE MONEYS PAID BACK FROM LOANS TO BE USED FOR ADDITIONAL LENDING.
  6.  THE  AUTHORITY  SHALL MAKE A LOAN DECISION OR LOAN GUARANTEE DECI-
SION, AND INFORM THE APPLICANT OF THE  AUTHORITY'S  DECISION,  NO  LATER
THAN  THIRTY  DAYS AFTER THE AUTHORITY RECEIVES THE APPLICANT'S APPLICA-
TION FOR AN EMPLOYEE OWNERSHIP LOAN OR EMPLOYEE OWNERSHIP  LOAN  GUARAN-
TEE. IF THE AUTHORITY REQUESTS THAT AN APPLICANT SUPPLEMENT ITS APPLICA-
TION  BY  SUBMITTING ADDITIONAL INFORMATION, THE AUTHORITY SHALL HAVE AN
ADDITIONAL FIFTEEN DAYS AFTER RECEIVING THE  ADDITIONAL  INFORMATION  BY
WHICH  THE AUTHORITY MUST MAKE A LOAN DECISION OR A LOAN GUARANTEE DECI-
SION AND INFORM THE APPLICANT OF THE AUTHORITY'S DECISION.
  § 7. Paragraph (a) of subdivision 4 of section 3032 of  the  education
law,  as  amended by chapter 683 of the laws of 1986, is amended to read
as follows:
  (a) Employer specific skill training grant programs shall be  designed
to  support,  supplement and contribute to the expansion and maintenance
of the economy of the state. Local education agencies shall apply to the
commissioner for grants for conducting employer specific skill  training
programs. Application for funds by local education agencies for training
programs  shall  be  in a manner consistent with the application process
for business and industry specific training  programs  under  the  voca-
tional  education  act of 1963 and the job training partnership act; the
sum of such grants per region shall not exceed the total funds allocated
or reallocated to the region for  such  purposes.  Such  programs  shall
provide  retraining  and upgrading to existing or potential personnel in
order to improve technology, quality control, production efficiency,  or
to  adapt  to  other  changes  in the labor market, or to provide unique
training programs to meet the emerging  needs  and  occupations  of  the
state's  business  and  industry or providing training to individuals to
promote the  successful  management  and/or  operation  of  [a  business
purchased  by such individuals to provide for their continued employment
through the formation of] a worker  owned  cooperative  or  an  employee
stock ownership plan OR EMPLOYEE-OWNED ENTERPRISES, AS DEFINED IN SUBDI-
VISION  FIVE  OF  SECTION  EIGHTEEN  HUNDRED  THIRTY-SIX-B OF THE PUBLIC

S. 5685                             5

AUTHORITIES LAW, BY SUCH EMPLOYEES. No  grant  shall  exceed  fifty  per
centum  of  the  total  program  cost. Eligible program cost may include
employer wages paid to the employee  for  time  spent  in  the  training
program.   Applications for a grant by local education agencies shall be
in a form prescribed by the commissioner.
  § 8. Subsection (c) of section 612 of the tax law is amended by adding
a new paragraph 42 to read as follows:
  (42) ONE HUNDRED PERCENT OF THE CAPITAL GAINS FROM THE SALE  OF  STOCK
OR  MEMBER  INTEREST  FROM  A  NEW YORK CORPORATION OR LIMITED LIABILITY
COMPANY TO AN EMPLOYEE-OWNED ENTERPRISE, AS DEFINED IN SUBDIVISION  FIVE
OF  SECTION EIGHTEEN HUNDRED THIRTY-SIX-B OF THE PUBLIC AUTHORITIES LAW.
IN ORDER TO QUALIFY FOR SUCH MODIFICATION AS  DESCRIBED  IN  THIS  PARA-
GRAPH,  SUCH EMPLOYEE-OWNED ENTERPRISE MUST HAVE ITS COMMERCIAL DOMICILE
IN NEW YORK. IF THE EMPLOYEE-OWNED  ENTERPRISE  IS  AN  "EMPLOYEE  STOCK
OWNERSHIP  PLAN,"  IT MUST COMPLY WITH FEDERAL REQUIREMENTS AS SUCH PLAN
IS DEFINED IN 26 U.S.C. § 4975(E)(7).
  § 9. This act shall take effect immediately; provided,  however,  that
section  one  of this act shall take effect on the one hundred eightieth
day after it shall have become a law.