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DENVER, CO – Governor Jared Polis today signed legislation that will create a refundable state income tax credit to support employee-owned businesses. HB24-1157 will also make the Employee Ownership Office a permanent resource for small businesses as they transition into employee-owned businesses.
“Employee-owned business models allow locally-owned businesses to stay within their communities; however, the costs and resources that are needed during transition can create barriers for employees seeking to purchase the business,” said Rep. William Lindstedt, D-Broomfield. “This legislation creates a permanent resource and lessens the financial burden of transitioning to employee-owned. . We’re continuing the work we’ve done in recent years to make Colorado a national leader in providing support to employee-owned business owners so they can thrive in their communities.”
“Employee-owned business models are not only beneficial for retiring business owners, but they also reward hard-working employees for their dedication to the company, promote higher wages, and keep businesses rooted in their communities,” said Rep. Stephanie Vigil, D-Colorado Springs. “By offering tax credits to new employee-owned businesses, we can incentivize more businesses to stay local and ensure that working people keep more of the value of their own labor."
HB24-1157 will make the Employee Ownership Office, temporarily created by Governor Polis in an executive order, a permanent office to continue supporting small business owners who are transitioning to an employee-owned business model.
The new law also creates a refundable state income tax credit for costs that come with running a new employee-owned business. The tax credit is available for tax years 2025 through 2033 and businesses are eligible if they have been partially or wholly owned by employees for fewer than seven years. This tax credit covers 50 percent of qualifying costs, granting up to $50,000 a year in savings.
In 2021, Colorado Democrats created a first-in-the-nation refundable income tax credit that incentivizes a move towards employee-owned business models. It provides support to business owners who are looking to move on from their ownership by passing their business onto their employees, allowing communities to retain homegrown economic opportunities while giving hard-working Coloradans new entrepreneurship roles.
Rep. Lindstedt also passed a law in the 2023 legislative session that expands the Employee Ownership Tax Credit by including partially employee-owned businesses, allowing new methods that businesses are using to transfer equity to employees, and strengthening incentives for eligible businesses that are transitioning to employee ownership with existing resources.