Today, the New Jersey Senate Labor Committee unanimously approved bill S945, legislation by Donald Norcross (D) that creates a gross income tax exclusion for capital gain in connection with qualified transactions in which small businesses establish ESOPs. "We want Jersey-owned businesses to stay locally owned," Senator Norcross said. The bill would allow the exclusion of state capital gains tax for businesses with 500 or fewer employees if the ESOP ends up owning at least 30% of the company's shares. The purpose of this bill is to incentivize small businesses to establish employee stock ownership plans to allow employees to share in ownership and success.
To qualify for the bill’s exclusion, the employer must be a NJ-based business that is non-publicly traded and has less than 500 employees. The employer’s sale of securities must be to an employee stock ownership plan, a New Jersey S corporation owned by an employee stock ownership plan, or an eligible worker-owned cooperative. And upon completion of the sale, the plan must own at least thirty percent of all the employer’s outstanding securities.