S T A T E   O F   N E W   Y O R K
 ________________________________________________________________________
 
                                    962
 
                        2023-2024 Regular Sessions
 
                             I N  S E N A T E
 
                              January 9, 2023
                                ___________
 
 Introduced  by  Sens.  BAILEY, ADDABBO, COMRIE, GOUNARDES, HOYLMAN, MAY,
   PARKER, PERSAUD, RAMOS, SANDERS -- read twice and ordered printed, and
   when printed to be committed to the Committee  on  Commerce,  Economic
   Development and Small Business
 
 AN ACT to amend the economic development law, the public authorities law
   and the tax law, in relation to the establishment of a state universi-
   ty-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  Section 104-a of the economic development law is REPEALED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.
                                                            LBD01164-01-3
 S. 962                              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. Subdivisions 3, 4, 5, 6, 7 and 8 of section 1836-b of the public
 authorities law, subdivisions 3, 6, 7 and 8 as added by chapter  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. 962                              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. 962                              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. Subsection (c) of section 612 of the tax law is amended by adding
 a new paragraph 47 to read as follows:
   (47) 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).
   § 8. 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.