Changes to employee stock ownership plans advanced

Senators gave first-round approval May 21 to a bill that would create a state definition of shareholder for purposes of employee stock ownership plans (ESOP).

Currently, individual stockholders in a qualified corporation can exclude from taxable income all extraordinary dividends paid on and the capital gain from the sale or exchange of capital stock of a corporation acquired through employment.

LB573, introduced by Omaha Sen. Burke Harr, would designate an ESOP as a qualified corporation, allowing its individual shareholders to exclude dividends and capital gains from their taxable incomes. Harr said Nebraska currently must rely on federal definitions that are not favorable to the state.

“We should be providing preference for employee-owned businesses,” Harr said. “This is just good public policy.”

The bill also would clarify that an ESOP should not be treated as a single shareholder, but that each participant in an ESOP constitutes a separate shareholder.

LB573 advanced on a 33-3 vote.