4The State Finance Toolkit

States have never more urgently needed to address employee ownership’s financing gap, nor have they ever been more prepared. The looming wave of business succession—constituting millions of businesses, trillions of dollars in enterprise value, a default outcome of firm closure—means that every year the challenge goes unaddressed, the life’s work of retiring business owners is shuttered, and the already fragile tax base of most states is eroded. No business attraction strategy can offset or reverse that. States must create more pathways to employee ownership.

A state can finance employee ownership transactions in several different and complementary ways, best understood in four different categories in which a state’s resources are committed in different ways:

• Transaction-level capital (section A) puts the state’s money directly in an employee ownership transaction. A revolving loan fund lends state dollars onto the borrower’s balance sheet in a senior or junior position, and a loan participation ties them to a private lender’s loan, buying into the lender’s facility or lending a companion loan alongside it. In both instances, these are funded assets that the state must underwrite, service, and collect—either directly or through a contracted intermediary.
• Credit enhancement and cost-of-capital tools (section B) does not involve direct public participation at the transaction level but positively influences the transaction’s terms. These tools generally put the state in a contingent position behind a private lender through a loan loss reserve, a loan guarantee, or collateral support, or they lower the borrower’s cost through an interest-rate buydown or a linked deposit.
• Institutional capital mobilization (section C) deploys the state not as a lender, but as a Limited Partner (LP). A fund of funds commits a portion of the state’s investment portfolio on a fiduciary, market-rate basis to private funds that finance employee ownership transitions. This mobilizes institutional capital at a scale no single loan can reach.
• Tax incentives (section D) commit no capital at all, instead foregoing revenue to change the post-tax economics of a sale to make employee ownership more attractive to a retiring business owner.

These tools are complementary to one another, occupying different points in the capital stack and taking different forms of public exposure. For that reason, they sometimes belong in different parts of state government and draw on different sources of funding; a comprehensive state program assembles these tools rather than choosing one among them.

The table below maps the toolkit against the objectives of employee ownership finance policy. No single instrument serves every objective, underscoring the need for states to assemble a toolkit rather than selecting a single tool.

A. Transaction-Level Capital

To understand the role of transaction-level tools, consider how employee ownership transactions (and ESOPs in particular) are generally financed. In a conventional ESOP transaction, a senior bank will lend against the company’s cash flow and collateral; in practice, this is two to four times EBITDA, which is usually between 40-60 percent of the purchase price.⁴⁰ Everything below the senior lender must be lent from elsewhere, and in traditional employee ownership buyouts, that usually comes from the seller, who takes back a deeply subordinated note for the balance and waits years to be paid.

The tools in this section improve the economics of the employee ownership transaction by lending into two different parts of the capital stack. The revolving loan fund supplies the capital (senior or junior) with the state as lender of record, replacing or shrinking the seller note, depending on the size of the fund.

The loan participation ties state dollars to a private lender’s loan, whether the state buys into the lender’s facility or writes a companion loan alongside it. It deploys only where a private lender is already in the deal and stretches the lender’s capacity rather than substituting for it. These approaches can operate independently or, as the illustrative examples later in this section show, together in a single transaction. In both cases, the state's capital crowds in private capital. It takes the position the private market will not; that is, the junior layer no lender will hold or the senior capacity no single lender will stretch to. In filling it, the state draws in the private dollars that close a transaction the unassisted market left alone would have lost.

Revolving loan fund

A revolving loan fund is among the oldest and most legible tools in American development finance, and the simplest to describe: a pool of capital held by a public lender that makes loans, collects repayments into the same pool, and then lends the money out again. With conservative underwriting and responsible stewardship, a single capitalization at a sufficient scale works indefinitely and is self-replenishing. New Jersey’s experience with the arithmetic of revolving loan funds is instructive: five revolving loan fund awards from EDA initially capitalized at $21.4 million supported nearly 850 loans exceeding $200 million over their lives.⁴¹ An employee ownership-specific revolving loan fund departs from the generic RLF template in minor but important ways. A conventional small business RLF will usually lend secured senior debt to borrowers who cannot obtain credit elsewhere. An employee ownership RLF can do that for the smallest firms (and should, as discussed below), but it can also lend in a junior position: subordinated to the senior lender, but senior to the seller’s note. This part of the capital stack is scarce (and for very small businesses, even senior debt can be scarce), pricing employee ownership out of competitive transactions that currently tend to go to financial or strategic buyers and resulting in outright closure for the firms without such buyers. In today’s market, the junior position is usually occupied by the concessionary seller note, representing a major impediment to scale. The state revolving loan fund that occupies this position disarms a seller’s largest objection (i.e., waiting years to fully realize the proceeds of their sale) and turns it into a financeable layer of the transaction without displacing a single dollar of private capital.

Framed that way, an RLF’s purpose is not only to finance the deals before it but to build the market from behind. The junior capital market for employee ownership is nascent. A fund that lends into it repeatedly does for the employee ownership capital market what development finance and public capital have done for others. The deep, liquid markets in which municipal and school debt now trade are not pure artifacts of the free market, but the product of decades of public policy, with public institutions lending first and private capital following.⁴² An employee ownership RLF exists in that same tradition: patient public capital that proves an asset class until a private market forms behind it.

Learning from authorized employee ownership RLFs

Though at least four states have authorized revolving loan funds for employee ownership, just one has capitalized theirs (Minnesota, whose Community Wealth-Building Loan Program includes employee ownership as an eligible use case). This carries a lesson that should discipline the design parameters that follow: across four decades, states have sporadically authorized employee ownership RLFs and almost never capitalized them.

As Table 2 shows, the only state money actually lending is Minnesota’s $3 million pilot, which is not employee ownership-specific; Colorado’s small conversion cost loan pilot, which addressed a challenge separate from the RLF described in this section, is no longer active. More often than not, states have enacted funds that have never made a loan. This has been true since Michigan and Massachusetts authorized RLFs in the 1980s to address plant closures. The lesson is structural, and compels capitalization as the central design consideration of an RLF, for an authorization that does not also resolve capitalization will not, by itself, lend.⁴³

Capitalization and sizing

A durable fund needs a capitalization plan with two features: it should be statutorily scoped to accept capital from any source that might fund it, and at least one source should be committed at enactment.

New Jersey’s 2026 statute (P.L.2026, c.83) addresses the capitalization question as well as any in the country, allowing the fund to be credited with state appropriations, federal dollars, philanthropic capital (whether grants or recoverable investments such as PRIs), NJEDA program revenue, and loan repayments (the details of each capitalization source for an RLF and every other instrument in this toolkit is the subject of Chapter 6).⁴⁴ The enabling statute in any state should open all of these doors, if not more. Insofar as a revolving loan fund may contemplate accepting philanthropic investments in the form of program-related investments (PRIs) or mission-related investments (MRIs), its authorizing statute should consider whether the implementing agency is already permitted to enter into loan agreements with third-party capital providers in its enabling statute.⁴⁵ Recoverability of PRIs and MRIs is a necessary design consideration to ensure external capital providers have a flexible range of options through which they can seed a revolving loan fund. In the event that an agency’s enabling statute is silent on its ability to enter to such agreements, the revolving loan fund legislation should include, among the other sources of capitalization listed above, loans, program-related investments, or other recoverable investments, subject to such terms of repayment and return as the agency may agree. Alternatively, the legislation may instead provide the agency the express authority to enter into funding agreements with public, private, and philanthropic capital providers for the purposes of the revolving loan fund. These agreements may provide for repayment from monies in the fund, including loan repayments and interest income, on a senior or subordinate basis, and may establish reserve accounts within the fund.

The revolving structure also shapes which money is best suited to seed the fund depending on a state’s fiscal health. Since a repaid loan returns to the pool, capital used to seed the fund is not spent the way grant money is spent; instead, it becomes a standing asset that finances transaction after transaction, making one-time and nonrecurring money (e.g., a budget surplus, a settlement windfall, or released legacy federal capital such as EDA RLF interest) particularly well-suited to the purpose.

How large an RLF should be capitalized has several considerations. A tier-one fund for worker cooperative and small ESOP lending is viable at $2 million to $5 million; an EDA grant plus match reaches that scale, loans run roughly $100,000 to $750,000, and at the smallest end the fund is often the only lender, because no lender is present. A larger fund finances a larger volume of small businesses: a $15 million to $25 million fund can finance several times the annual deal flow of the “starter” fund, write the occasional larger junior position where required, and still hold a prudent single-borrower limit near ten to fifteen percent of capital depending on the design of the fund.

Economic impacts of an RLF

The table below models an employee ownership fund at three capitalization levels over ten years. The scenarios are illustrative, but the pipeline and deal sizes are specific to New Jersey. The mechanics that drive the results (deployment pace, loan size, a low default rate, and the senior debt each subordinated loan sits alongside) are properties of the fund’s design, not of any one state’s economy.⁴⁶ The lending multiplier in Table 3 best captures the promise of the RLF. Repaid principal plus interest is relent, so a one-time capitalization finances far more than its face value (in the example scenarios shown, it would reach cumulative lending of between 2.7 and 4.1 times the fund’s initial capitalization over a decade). The modelling suggests an employee ownership RLF is a particularly efficient development finance instrument.

Design considerations

Underwriting and eligibility

The qualifying transaction for any employee ownership RLF should be majority employee ownership through an ESOP, worker cooperative, or employee ownership trust, with capital available for the acquisition itself and, within limits, the transaction-related and post-transition working capital and advisory costs.⁴⁷ Minority transactions face fewer capital constraints and by definition require less liquidity for the seller. For the smallest businesses that banks will not lend to, there is an absence of senior debt that loans in even the smallest RLF tier can fill. But, as has been discussed, the constraint that suppresses employee ownership is not senior credit; more than a dozen commercial banks maintain dedicated ESOP lending groups, and nearly 300 new ESOPs form each year, overwhelmingly bank-financed.⁴⁸ The binding constraint in this segment of the market is the junior layer, whether that be unitranche financing or structured equity (e.g., subordinated debt with stock warrants). A fund confined to microloans to the smallest businesses would leave that constraint untouched, while a fund that lent senior to bankable small businesses would duplicate a functioning market. Consequently, RLFs should lend with the following discipline: the fund should lend junior where its additionality is structural and crowd-out is absent, because the capital it displaces is the seller’s own concessionary paper. Where lenders are absent, it may lend senior. Where a lender is present, the fund should rely on, not duplicate, the senior lender’s diligence, reserving full underwriting for the deals where it lends alone.

Pricing and tenor

The pricing of a state employee ownership RLF depends on its size and objectives. Every loan the RLF makes must be priced below the private market, as the instrument’s purpose is to provide attractively priced debt and reduce the cost of capital to the employee-owned firm. The fund’s breakeven rate covers expected losses, servicing, and inflation, and is the rate against which the fund’s pricing should be benchmarked. Priced at or above breakeven, the fund preserves or grows its real capital, and a single capitalization can lend in perpetuity; priced below it, every loan pays part of its subsidy out of the fund’s own capital, and a portfolio built exclusively around those terms will eventually stop revolving.

The fund’s standard rate should sit at or above breakeven and lending below breakeven should be confined to very specific priorities (for example, NJEDA’s 3 percent Okonite loan sat 800 basis points below its own bank loan, in part because it was in a distressed region and addressing an acute economic risk). Regardless of pricing approach, tenor should be 10 to 15 years, with amortization shaped around the senior facility.

Loss treatment and sustainability

The evidence on ESOP lending and debt sustainability is favorable and clear. An analysis of 1,232 leveraged ESOP bank loans across three large banks over 2009 to 2013 (including the Great Recession) found loss-imposing defaults at roughly 0.2 percent annually, with losses equal to 1.5 percent of portfolio value, against comparable mid-market default rates of 2 to nearly 4 percent per year.⁴⁹ For the state development finance agency, this means that expected losses on well-underwritten employee ownership credit appear genuinely low, and materially below comparable conventional lending. Firm survival research for employee-owned firms corroborates the direction of this trend.

This trend is instructive for how a development finance agency should design around sustainability. A $20 million mezzanine tier fund writing $1 million to $3 million junior loans at 12 year maturities may originate roughly $2.5 million to $3 million a year from repayments alone. Sustainability pricing at, say, 300 basis points above a senior lender’s rate would cover an annual loss assumption, servicing, and inflation, while explicit-subsidy pricing may not. Depending on the junior rate of an explicit-subsidy-priced RLF, such loans may functionally be a slowly amortizing grant, which a legislature may still rationally choose (it should just be clear-eyed about what it is choosing).

The pricing of the Okonite loan was an explicit choice by NJEDA: the public tranche lent at less than a third of Bank of America’s senior rate (a defensible subsidy given that Passaic County’s unemployment rate was running between 23 percent and 25 percent at the time). The maturity structure (25 years for NJEDA with a principal moratorium beneath a 5 year private loan) was also explicitly solving an ongoing challenge for ESOP financing: the company’s cash flow must service both the acquisition debt and fund the ESOP, so the junior layer provided by the state RLF must be patient.

Loan participation

In a loan participation, the state lends alongside a private lender on a single transaction through one of two structures:

1. A purchase participation, in which the state buys an interest in a loan that a private lender originates and takes its share of principal, interest, and collateral proceeds while the bank remains the lender of record, the underwriter, and the servicer; or
2. A companion loan, in which the state originates a separate second loan to the same borrower, which it can make only in tandem with the private lender’s loan.

Whether a state participates in a senior or subordinated position is largely a design choice. A purchased share can rank pari passu with the bank (equal in repayment priority) or subordinate to it, and companion loans are usually subordinate. Subordinated loans are common across the federal State Small Business Credit Initiative (SSBCI) program inventory, from West Virginia’s Subordinated Debt Fund and Wisconsin’s WHEDA Subordinate Loan Participation Program to the Vermont Economic Development Authority’s companion loan program, which has lent in a subordinate, fixed-rate position since the mid-1990s. ⁵⁰ The structure is thoroughly precedented in state development finance; it is one of the U.S. Treasury Department's approved SSBCI program types for employee ownership, and it is how the Finance Authority of Maine supported the Bell Street Builders cooperative conversion in 2023, the first SSBCI- financed worker cooperative buyout in the country.⁵¹ No state, though, runs a dedicated loan participation instrument built just for employee ownership.

Whereas a revolving loan fund can be structured to fill a mezzanine capital gap in employee ownership finance, a senior, pari passu loan participation addresses the constraint on how deep a lending institution can lend into an employee ownership transaction; collateral coverage requirements and hold limits often cap senior lending capacity below what a mature business’s positive cash flows could reasonably support.

A state participation of 30 to 50 percent of the facility would let the lender roughly double its effective capacity, bring in a second institutional lender, and trim the blended senior cost of capital to the employee-owned business. A subordinated participation or companion loan works slightly differently, filling the junior layer itself, with the private lender required under SSBCI to keep at least 20 percent of the transaction at its own risk (the state may fund up to 80 percent).⁵² Which lending position is most effective at addressing a transaction’s financing gap largely depends on the firm’s market segment. For the smallest businesses, where no institutional lender may be present at all, expanding senior credit is additive. In larger transactions that would ordinarily carry a large subordinated seller note, a larger senior facility would only modestly help, while a subordinated participation could more meaningfully reduce the note’s size.

Loan participations and loans originated from a revolving loan fund carry very clear similarities, especially to a borrower. The ultimate distinction between the two rests not with a loan’s lien position (both instruments can sit senior or junior in the capital stack) but with deal selection. A participation happens only where a private lender is already participating in a deal, so it reaches transactions that lenders are already financing but cannot fully hold. An RLF, on the other hand, can originate on its own terms if preferred and can lend where no lender ordinarily would, especially to the smallest businesses. Though states will vary on a case-by-case basis as to which tool is most strategic, most would likely be better served by an RLF, all else being equal. The RLF is the more durable pool of capital, as it outlives SSBCI’s deployment window and faces no federal co-lender requirement, among other reasons. Still, layering a senior participation with a junior loan from an RLF could itself be an effective lending strategy, as the next subsection shows.

Layered capital strategies: RLF and loan participation

Treated separately, each transaction-level tool addresses one layer of an employee ownership loan.

Deployed together, and combined with the credit enhancements of the next section, they enable a development finance agency to assemble the competitive financing that today only the rare and patient seller can provide.

Consider a company selling to an ESOP for $10 million. The baseline leaves the seller self-financing as much as 60 percent of the deal, which is by definition a concessionary exit.

Where a lender will provide a senior loan but the subordinated seller note is simply too large, an effective intervention is a senior loan paired with a junior loan from the RLF (or a subordinated participation): a subordinated junior loan fills the middle of the stack and could cut the seller note from, say, 60 to 25 percent.

Where the lender is constrained by collateral or other limits rather than by credit, the answer is a senior loan with a loan participation from the state: a pari passu share that enlarges the senior facility and shrinks the seller note to 40 percent while keeping the state in a senior position (or, as the next section discusses, in a contingent position with a guarantee or collateral support, which expands the lender’s capacity without funded capital at all).

Where both conditions are true (a subordinated seller would be too large and the lender is constrained in how much it can lend), the answer is a senior loan with a pari passu loan participation and a junior loan from the RLF. The net effect in the illustrative example being considered is that the seller note is reduced to a mere 10 percent so that the owner receives 90 percent of their proceeds at closing. In this approach, the ESOP sale suddenly looks like the sale to a strategic or financial buyer that the owner was likely considering.

B. Credit Enhancement and Cost-of-Capital Tools

Where transaction-level capital puts the state’s own money into a deal, the tools outlined in this section change the economics of the employee ownership transaction without funding it on a dollar-for-dollar basis. This section’s tools differentiate themselves in whether they shift risk or shift price.

A credit enhancement shifts loss risk off of the private lender and onto the state. As a result, the lender makes a loan it would otherwise avoid or makes a loan they were going to make anyway larger because the state has agreed to absorb some share of the loss in the event of default. A loss reserve, collateral support, and a guarantee all fall into that category. In each case, the state’s exposure is contingent: it costs nothing unless a loan defaults, which is exactly why credit enhancements leverage public capital so efficiently.⁵³ A cost-of-capital tool, on the other hand, shifts price, not risk. An interest rate buydown or a linked deposit lowers what the borrower pays while leaving the lender’s exposure untouched.

Loan loss reserves and portfolio insurance

A loan loss reserve is the portfolio-level tool (often called a Capital Access Program) in which the borrower and lender (and sometimes the state) contribute a small premium on a loan into a reserve that the lender draws against in the event of a loan default. The reserve is replenished or increased as new loans are enrolled, and once it is exhausted, the lender bears subsequent default losses itself. With a loan loss reserve, the state does not underwrite an individual loan. It sets program/contribution parameters and matches premiums while the lender underwrites loans. A modest reserve supports a multiple of itself in lending, and the lender’s own premium contribution keeps it partly at risk, making it among the most capital-efficient enhancements a state can run.

The tool has a lengthy track record in development finance, dating back to 1986, when Michigan created the first Capital Access Program (CAP).⁵⁴ Since then, roughly two dozen states and municipalities have operated one and the structure was prominent enough that the Small Business Jobs Act of 2010 wrote it into SSBCI as its own statutory category.

⁵⁵ California’s CalCAP for Small Business is the largest program operating today and illustrates the standard parameters of the instrument: the lender and the borrower each contribute 2 to 3.5 percent of the enrolled loan into a loss reserve account held at the lender, the state matches the combined contribution dollar for dollar, and the pooled reserve covers up to 100 percent of the loss on any enrolled loan, up to the reserve’s balance. Loans up to $5 million qualify, with up to $2.5 million enrollable per borrower over three years. Under SSBCI 2.0, states have allocated a smaller share to CAPs than to any other major program type, with just 4 percent of SSBCI funds going to CAPs across a dozen programs compared to 28 percent going to loan participation programs.⁵⁶ This is largely because states have gravitated toward instruments that let them underwrite individual transactions, at least with SSBCI.

Unlike many of the other instruments in this playbook, it is often best for states to avoid a dedicated CAP/loan loss reserve just for employee ownership. A loss reserve depends largely on a high volume of similarly sized loans, enrolled steadily, with no single loan large enough to exhaust the reserve. Employee ownership transactions generally produce the opposite, with a small number of large acquisition loans concentrated among a few lenders, so a standalone reserve would hold too few loans to absorb even one default. Instead, employee ownership loans should be enrolled in the state’s existing small business CAP, where the pool is large enough to absorb a hypothetical loss. SSBCI-funded CAPs can enroll them under the employee ownership carve-out, subject to the CAP’s tighter limits (borrowers with 500 or fewer employees and loans of $5 million or less). The reserve ratio should be set against a conservative loss assumption, and program rules should specify how the reserve is replenished and who bears losses once it is exhausted.

Collateral support

Collateral support addresses the reason that lenders cap the size of a senior loan in an employee ownership transaction, which is the shortage of collateral that would otherwise securitize the loan.

Employee ownership acquisition loans are necessarily cash flow loans. The company’s assets (equipment, receivables, real estate, etc.) rarely cover the purchase price, so senior lenders have a ceiling against which they can lend. Collateral support raises that ceiling, with the state placing a cash deposit with the lender pledged as additional collateral against a specific loan. This allows the borrower’s collateral coverage to clear a lender’s threshold and increase the size of the loan the lender is willing to underwrite.

Colorado’s Office for Economic Development and International Trade (OEDIT) operates the clearest precedent in the country for a collateral support program engineered to improve employee ownership finance. The Cash Collateral Support program, administered by the Colorado Housing and Finance Authority as program manager and funded with roughly $35 million of SSBCI 2.0 capital, deposits cash into the account pledged as collateral on a qualifying loan. The deposit is structured as a last loss protection: on default, it “is available to the lender only after all other collateral secured by the loan has been liquidated,” which keeps the lender’s incentive to responsibly underwrite intact. For most projects, the deposit is the lesser of 35 percent of the loan amount, $1 million, or the size of the demonstrated collateral shortfall, on loans up to $20 million for a 3-year initial term against a 4 percent borrower fee.

Colorado’s program is a strategic credit enhancement in that it names employee ownership first among its qualifying uses: projects “supporting employee ownership, including loans to existing employeeowned companies and loans supporting the transition to an employee-owned structure” may receive a deposit of up to the lesser of 80 percent of the loan, $3 million, or the shortfall. Across all uses, the program reports a portfolio of 376 loans supporting roughly $200 million in lending without a loss of capital, evidence that last loss cash collateral can widen lenders’ boxes at modest realized cost.⁵⁷ Beyond the template and design parameters of Colorado’s program, the parameters that decide whether collateral support is the right tool for a state’s employee ownership credit enhancement suite are coverage depth, term, and what level of credit it covers. Coverage must be deep enough to clear a collateral shortfall on a cash-flow-heavy deal (which is why Colorado’s 80 percent tier exists), and any state adopting the model should adopt the enhanced tier for employee ownership at the outset. In designing the term for collateral support, a state should either match the support term to the senior loan or commit in program rules to extensions of the term so that support does not leave when there is still collateral shortfall risk. Finally, the last loss structure should be retained, as it preserves responsible and conservative lender underwriting.

Loan guarantees

The loan guarantee is perhaps the most familiar credit enhancement and, for a state with limited capital to deploy but a willingness to stand behind private lending, among the most efficient. The state guarantees a defined share of a private lender’s loan: if the borrower defaults, the state pays that share after the lender has pursued its ordinary remedies. Unlike collateral support, no cash leaves the state’s general fund or an agency’s account at closing; the exposure is purely and genuinely contingent until a default occurs. This is what lets a guarantee support a large volume of lending against a small reserve (it helps to think of a loan guarantee and the loan participation of the previous section as the contingent and funded versions, respectively, of the same concept).

States already run guarantee programs at scale, most of them federally funded: under SSBCI 2.0, 28 loan guarantee programs drew roughly 17 percent of allocated capital program funds, about $1.4 billion as of mid-2023.

⁵⁸ California’s Small Business Loan Guarantee Program, administered by the California Infrastructure and Economic Development Bank (IBank) through a network of nonprofit financial development corporations, guarantees up to 80 percent of loans and lines of credit as large as $20 million, with a maximum guaranteed amount of $5 million.⁵⁹ Oregon’s Credit Enhancement Fund covers up to 80 percent of a private loan, with insurance exposure of up to $6 million per loan.⁶⁰ Georgia’s Small Business Credit Guaranty covers 50 percent of loans up to $1 million; the uncovered half satisfies SSBCI’s 1:1 private financing requirement and keeps the lender’s capital at risk.⁶¹ None of these programs is specific to employee ownership, but each can, in fact, enroll an employee ownership conversion loan under the SSBCI carve-out. Doing so would be a template for a state adding employee ownership to an existing guarantee program rather than building one from scratch.

A transaction may carry a guarantee from any of three sources, and only two of them are programs the state builds. The federal 7(a) guarantee is obtained by the lender, not the state, and guarantees the lender’s senior loan; a state may lend subordinate to a 7(a)-guaranteed loan, but it cannot purchase a participation in one.⁶² The SSBCI-funded loan guarantee program and the state-backed loan guarantee are the state’s guarantee instruments. Table 5 compares all three sources of a loan guarantee in an employee ownership transaction.

Where a particular employee ownership transaction fits the 7(a) program, the loan guarantee sits with the private lender at no cost to the state, and to the extent that there is any role for the state, it is mostly in stacking financing and additional credit enhancements around the 7(a)-guaranteed layer of the transaction. The state can provide its own guarantees through an SSBCI program or its own state-backed program. The SSBCI-funded guarantee reaches larger transactions and the worker cooperatives that 7(a) still cannot serve, contingent on the SSBCI match and leverage requirements and sunset conditions. The state-backed guarantee is a residual instrument that is not bound by federal rules and, depending on program design, can cover the exact share of a loan that a particular deal requires, but it does draw on the state’s own credit capacity and must be reserved against.

The design parameters that keep a loan guarantee program disciplined are coverage share and pricing.

Coverage should be capped well below 100 percent (a guarantee of 50 to 80 percent of principal is typical), with the precise figure set against the program’s loss tolerance and the lender’s demonstrated appetite. A guarantee should also carry a fee to defray expected losses and to confine the enhancement to deals that genuinely need it; A guarantee should not be applied to loans that a lender would make without it.

The two cost-of-capital tools discussed below lower the borrower’s price without altering the lender’s risk and are complementary to the range of credit enhancements a state development finance agency may consider. In most states, the following tools are in the remit of a state treasurer, not an economic development or development finance agency.

Interest rate buydowns

An interest rate buydown addresses the second of the twin objectives of employee ownership finance policy: it lowers the cost of capital to the new employee owners. The state pays a lender as a lump sum into escrow at closing or a stream over a set period in exchange for a reduced rate to the borrower. The lender’s yield is unchanged, the borrower’s interest rate falls, and the difference is the state’s cost. In this way, unlike the previous tools discussed, an interest rate buydown represents a genuine subsidy.

States and localities have used interest rate buydowns and interest subsidies for decades to lower borrowing costs for manufacturers, farmers, and small businesses. The Bank of North Dakota, for example, buys down the rate on loans to value-added agricultural businesses that have borrowed from an outside lender.⁶³ A state offering a buydown for an employee ownership transaction is therefore repurposing a mature, low-risk instrument.

Unlike most other tools in this chapter, a buydown is not a tool meant to close a financing gap. It lowers the price of a loan that already exists and does not necessarily function to make a previously unbankable deal bankable. The revolving loan fund, the loan participation, and the credit enhancements above make a transaction possible. The buydown (and the linked deposit strategy outlined next) makes a financed transaction more affordable to the newly established ESOP or worker cooperative that now carries the acquisition debt. It is most effective as a time-limited cost reduction over the first few years after closing, when acquisition debt is heaviest. There are relatively few design considerations: the size and duration of the reduction, whether it is delivered as an escrowed lump sum or a stream over a period of time, and the same majority employee ownership eligibility test other tools should use.

Linked deposits

A linked deposit program addresses the same policy objective (i.e., a lower cost of capital for the employee-owned firm) by a slightly different route. The state—oftentimes its treasurer—places a deposit with a participating bank at a below-market rate, and the bank passes the savings through to the borrower while bearing the full credit risk exactly as it otherwise would have. In this case, the state’s cost is the yield it forgoes by depositing at a below-market rate. This strategy is well established (Ohio’s GrowNOW and Missouri’s MOBUCK$ programs run general small business versions, capped as a share of the state’s cash management portfolio), but no state actively operates a program targeted at employee ownership.⁶⁴ In 2008, however, Indiana began a short-lived, and ultimately low-volume, experiment in linked deposits for employee ownership lending. Indiana Treasurer Richard Mourdock, himself a former ESOP trustee, launched the Indiana ESOP Initiative, which was functionally an owner education program paired with a $50 million linked deposit facility under which the state placed certificates of deposit (CDs) with Indiana banks at a reduced return in exchange for below-market loans to companies financing an ESOP. It rested on the Treasurer’s authority over state deposits and was never codified in statute. Only a few loans were made, with two publicly identified, both in 2010. This included a $1.42 million transaction that took HIS Constructors, an Indianapolis construction firm, to employee ownership. There was no announcement of the program’s end, but Mourdock left office in 2014, and by 2018 the Treasurer’s office stopped publicizing it. This well-intentioned foray into linked deposits for employee ownership illustrates the perils of an administrative-only approach to state employee ownership finance: a program that exists only as an officeholder’s priority ends when the officeholder’s tenure does, which is why Chapter 9 sequences initial administrative action toward a durable legislative core.

The five tools discussed in this section are not ranked substitutes as much as they are a menu sorted by what the state puts at stake and what financing impediment the transaction needs addressed. Table 6 compares the tools and considers when each is most appropriate for deployment into a transaction.

If a deal will not be financed because the seller note is too large, none of these tools is the answer; that is the job of the revolving loan fund. If it is financeable but the lender will not extend enough senior credit because collateral falls short, collateral support is the precise instrument. If a capable lender will make the whole loan but for the loss exposure and default risk, a guarantee is the most capital-efficient response.

And only once a deal is ready to be financed are the price tools relevant, lowering the newly employeeowned firm’s cost of capital through its early years. The tools also layer, as with the previous suite of tools, which is where an agency can assemble a comprehensive development finance toolkit from contingent and low-cost instruments: a senior loan taken to full capacity by a guarantee, a junior loan from an employee ownership RLF shrinking the seller note, or a buydown over the first 3 years. In those scenarios, each is doing the one job it is uniquely suited to while keeping the state’s funded exposure limited to the layer where funded capital is absolutely necessary.

C. Institutional Capital Mobilization

The first two sections of the toolkit placed the state inside individual transactions as either a lender or guarantor. This subsection describes the state differently, instead as an institutional investor committing a capped share of its own investment portfolio. In this strategy, the state acts as a limited partner (LP) to professionally managed funds that in turn finance employee ownership transactions. The state underwrites no single deal, instead selecting and monitoring fund managers who build their own portfolios. That shift from lender to anchor investor makes this both the highest-leverage instrument (particularly from the vantage point of scale and building a nascent capital market) and the one that demands the most discipline.

Whereas, say, a revolving loan fund recycles its capital one transaction at a time, the fund-of-funds commitment described below is multiplied first by the private capital a manager raises alongside the state, and again by the capital that a credible anchor like a state draws into the market over time. Every other tool can rest partly on an economic development rationale: a legislature may capitalize a revolving loan fund, for example, because business succession is a firm and job retention risk, which is reason enough. A treasurer or an investment board, because of their fiduciary obligations, cannot commit the state’s investment assets on that basis alone. They are held to fiduciary standards considering riskadjusted returns, portfolio fit, and a prudent selection and monitoring process for funds. The policy and economic benefits of employee ownership, however real, are an externality of a sound investment in this instance. The nature of these fiduciary obligations and the associated performance targets are variable depending upon the source of the asset pool (for example, pension assets vs. a state working capital pool).

Theory of the case A fund-of-funds invests not in individual companies but in other investment funds. The state commits as LP, the fund-of-funds commits to a portfolio of specialized underlying funds, and those funds make the individual investments, with layers of professional management between the state’s balance sheet and any single deal. Applied to employee ownership, the underlying funds are the specialized vehicles that have emerged to finance employee ownership transitions with senior and subordinated debt, mezzanine capital, and structured equity. It is a real and growing segment of the capital markets, with over two dozen funds as of 2026 managing roughly $865 million.⁶⁵ Still, that is an employee ownership capital market measured in the hundreds of millions against a demographic wave and market opportunity measured in the trillions, by McKinsey’s estimate.

The incumbent investment funds report that their binding constraint is not a shortage of viable transactions (to the contrary), but a shortage of anchor institutional capital willing to commit at the scale and time horizon the strategy requires. This is exactly what a state investment portfolio, with its scale, duration, and return orientation, is built to supply. Put simply, a state LP commitment sends a powerful demand signal to institutional investors and emerging funds alike, since a credible capital allocator validating a nascent asset class draws other institutional capital into that asset class.

Two features of ILGIF’s design transfer directly into a potential employee ownership fund of funds. The state invests through fund managers rather than directly into deals, holding relationships across dozens of managers and approaching a hundred underlying funds, which is how it diversifies and how it stays out of underwriting individual transactions. And rather than requiring its managers to invest only in Illinois (which would cut against geographic diversification imperatives, distorting portfolio construction and depressing returns), it requires each manager to deploy a multiple of the state’s committed capital into Illinois companies over the fund’s life. This represents a contractual floor that crowds in private investment while leaving the fund managers free to build their own diversified portfolio.

As of the end of 2024, the fund reported a net internal rate of return of 10.4 percent and a net multiple of 1.37.⁶⁶ These represent investment outcomes competitive with the private markets, earned while serving an in-state mandate at no fiscal cost to the state.

ILGIF did not create the Illinois venture market (Chicago companies were raising well over a billion dollars a year before ILGIF launched). But it did deepen a narrow, underserved segment of the venture market (early-stage capital, emerging and diverse managers, and in-state investment opportunities) by acting as an anchor LP and using its commitment to crowd in private capital behind it. And it was so successful at doing so that it stood up a second portfolio fund-of-funds, the FIRST Fund, on the same statutory and operational design but for in-state infrastructure and real estate assets.

Illinois is no longer alone. In 2025, Oklahoma directed its Treasurer to create an “Invest in Oklahoma” program placing the Treasurer’s investable cash balances into Oklahoma-based private equity, venture, and growth funds. California offered a slightly different approach, too, with its Infrastructure and Economic Development Bank investing as an LP in venture funds targeting priority sectors, a standing demonstration that a state can take an LP position in private funds to steer capital toward policy goals.⁶⁷

The instrument

An employee ownership development fund applies this tradition to a new asset class: the state commits a capped share of its investment portfolio as an anchor LP to a fund-of-funds managed by a professional investment manager, which in turn invests in the specialized funds financing employee ownership transitions.

Illinois State Representative Will Guzzardi’s Employee Ownership Development Act (HB 4955) would do just that. It directs the state to commit a portion of its non-pension investment portfolio to professionally managed funds investing in employee ownership transactions.⁶⁸ Because only a public investment officer acting under a fiduciary standard can authorize the tool, the case for it has to be built on investment merits. More specifically, it rests on three propositions:

1. That the underlying funds pursue legible institutional strategies against cash-flowing middle-market companies, which should interest any investment committee.
2. That a small, capped, diversified, long-duration allocation of this sort is the kind of position a public investment officer adds to improve a portfolio’s risk-adjusted profile (leveraged ESOP buyouts have historically defaulted at much lower rates relative to comparable middle-market credit).⁶⁹
3. That the structure is no longer untested, with ILGIF, FIRST Fund, Invest in Oklahoma, and the California Infrastructure and Economic Development Bank compiling a decade plus of competitive net returns.

The design parameters follow from these propositions. The natural home for a state-level fund-of-funds is the office that already manages the state’s investment portfolio (most often the treasurer). Portfolio management should be contracted to a professional manager, because the state’s comparative advantage is as an allocator and mandate-setter, not a private markets direct investor. The in-state investment requirement must be calibrated to recognize the nascency of the employee ownership capital market. Requiring that all of the state’s capital be invested in-state would force the construction of an undiversified portfolio and undermine the fiduciary case, so the state should obligate the underlying funds to deploy a conservative multiple of the state’s commitment into the state over the fund’s life while permitting national diversification. Eligibility should direct capital to funds whose transactions produce broad-based, majority employee ownership.

D. Tax Incentives

The tools considered so far supply capital or lower its cost or risk. The tax incentives in this subsection work along a separate register. They put no dollar directly into the transaction, but instead change the post-tax math of the decision to sell. The goal of tax incentives in an employee ownership context, much like the other tools, is to make a sale to an employee ownership structure more attractive than the tax code would otherwise make it relative to a sale to a strategic or financial buyer. Tax incentives are a complement to the broader financing toolkit: a capital gains tax break will not close a deal that no institution will finance, and a revolving loan fund will not move an owner who keeps more after taxes by selling to a competitor. They also differ in how their cost is borne. A tax incentive is foregone revenue and scored by a fiscal note, rather than an asset that recycles or a contingent liability.

The different types of employee ownership tax incentives available to states are shaped by the tax advantages already afforded to employee ownership by the federal government (with most of these directed at ESOPs). The federal tax code offers employee ownership three central advantages:

1. Section 1042: the selling owner’s capital gains deferral. An owner who sells stock of a closely held C corporation to an ESOP or eligible cooperative holding at least 30 percent after the sale may defer the taxable gain by reinvesting proceeds in qualified replacement property (QRP). The gain carries over into the QRP’s basis and comes due when that property is sold, unless the owner holds the replacement property until death, at which point the stepped up basis makes the deferral permanent. Beginning with sales after December 31, 2027, the SECURE 2.0 Act extends a limited version of this election to sales of S corporation stock, allowing deferral of 10 percent of the gain.⁷⁰
2. S corporation ESOP exemption: Because an S corporation’s income passes through to its shareholders and an ESOP trust is tax-exempt, the ESOP’s share of earnings escapes federal income tax, so a wholly ESOP-owned S corporation pays no federal income tax at all. This is a permanent feature of the operating structure of the S corp ESOP.
3. ESOP debt service deductibility: Contributions used to repay the principal and interest of an acquisition loan are deductible, so a leveraged ESOP repays the debt it took on to buy the company with pre-tax dollars, an advantage no conventional buyer enjoys.⁷¹

As broad and generous as the federal tax incentives are, none of the federal incentives address soft transaction costs (e.g., costs related to feasibility studies, legal services, or valuation work) that an owner must incur simply to learn whether a sale to employees is viable.

Five states have enacted employee ownership-specific tax incentives broadly sorted into three families.

The first and most common adds a state level capital gains deduction; because most state income tax codes track Section 1042, its deferral already postpones state capital gains tax in most states. The state level capital gains deduction for employee ownership allows a seller to deduct some or all of the gain on a sale, removing some or all of the gain from the state tax base outright. Missouri, for example, allows a seller to deduct half of the gain on a sale to a Missouri ESOP that holds at least 30 percent afterward. This was made permanent in 2023. Nebraska, the oldest state tax incentive on the books, offers a one-time lifetime exclusion of gain on stock acquired through employment and counts each ESOP participant as a shareholder for its eligibility test. Iowa is the broadest of the group: it lets a long-tenured employee owner of a qualifying corporation exclude the entire gain on the sale, with no ESOP requirement and no 30 percent ownership threshold, a full 100 percent exclusion that phased in for tax years beginning in 2025. It replaced a narrower 50 percent ESOP-specific deduction Iowa enacted in 2012 and repealed in its 2018 tax overhaul. Colorado, in 2025, allowed an owner who sells at least 20 percent to a qualified employee-owned business to subtract the resulting gain.⁷² The second category of state tax incentives, conversion cost tax credits, has no federal analogue and addresses the soft costs of getting to an employee ownership sale in the first place. Colorado runs the most developed version, raised in 2025 to 75 percent of qualifying costs and layered with companion credit for young employee-owned firms and for the nonprofits that help businesses convert. Washington enacted a comparable 50 percent credit in 2023, originally through 2030; a 2025 budget bill closed it to new credits after June 30, 2025. Colorado is the only state to have begun providing tax advantages in a third category with a subtraction for the income of a worker cooperative.⁷³

A state considering the role of tax incentives in rounding out a comprehensive strategy to improve the economics of the employee ownership transaction can choose among a handful of well-documented models. These should always be paired with a comprehensive financing strategy; tax incentives move the seller’s decision as to who to sell to, but they do not supply the buyer’s capital and an owner persuaded to explore employee ownership still confronts the financing gap the rest of this toolkit works to close. The holistic approach uses both levers together (incentives to move the seller, financing tools to fund the transaction).

Sources

Source numbering follows the full playbook.

39. Adapted from Jack Moriarty’s presentation at the 2026 Mid-Year Fellows Workshop in Honor of Louis O. Kelso hosted by the Rutgers Institute for the Study of Employee Ownership and Profit Sharing.
40. SES ESOP Strategies, “ESOP Financing”; Jack Moriarty, Financing the Growth of Employee Ownership: Policy Landscape Report, Lafayette Square Institute, “The Financing Gap.”
41. New Jersey Economic Development Authority, Board Book, June 9, 2021, Exhibit 1 (five EDA revolving loan fund awards initially capitalized at $21,374,606 that “revolved and were used successfully to provide nearly 850 loans exceeding $200MM”).
42. Yakov Feygin, Advik Arun, and Chirag Lala, Revolving Loan Funds, Center for Public Enterprise (Aug. 2024), 14–15 (the depth of established public finance markets is “a policy outcome,” and revolving institutions enable “learning by doing … through which critical asset markets are formed and deepened”).
43. Sources for Table 2: Michigan Public Act 217 of 1985 (repealed 2002); Massachusetts General Laws ch. 23D, § 16; ch. 392, Laws of 2023 (Washington); Minnesota Laws 2023, ch. 53 (Community Wealth-Building Grant Pilot); Indiana Senate Bill 175 (2025) (died in committee); New York Senate Bill 962 (2024), continued as S.339 (2025–26); Colorado OEDIT Employee Ownership Loan (pilot; no longer active); N.J. P.L.2026, c.83 (S4218/A5016).
44. N.J. P.L.2026, c.83 (S4218/A5016) (permitting the fund to be credited with state appropriations, federal funds, philanthropic capital in grant or recoverable form, NJEDA program revenue, and loan repayments).
45. The enabling act of NJEDA, for example, expressly empowers it to contract for and accept loans of funds from any source, public or private, and to comply with their terms and conditions (N.J.S.A. 34:1B-5(j)), alongside its general powers to enter into contracts and to establish and maintain reserve funds. This enables private and philanthropic sources to provide PRIs and MRIs without P.L.2026, c.83 creating a new authorization to do so.
46. Lafayette Square Institute, New Jersey employee ownership revolving loan fund impact model (2026) (ten-year projections under stated assumptions; illustrative of the tool’s design rather than realized results).
47. N.J. P.L.2026, c.83, § 8(c) (eligible uses, including transaction-related and post-transition sustainability needs).
48. Susan Hoesly (Verit Advisors), “ESOPs Offer Relief in Today’s Constrained Financing Environment,” The ESOP Association (Mar. 2023); National Center for Employee Ownership, Employee Ownership by the Numbers (updated 2026).
49. Corey Rosen and Loren Rodgers, Default Rates on Leveraged ESOPs, 2009–2013, National Center for Employee Ownership (2014) (1,232 leveraged ESOP bank loans across three large banks; loss-imposing defaults of roughly 0.2 percent annually and losses equal to 1.5 percent of portfolio value, against comparable mid-market default rates of roughly 2 to 4 percent per year).
50. U.S. Department of the Treasury, SSBCI Program Profile: Loan Participation Program (May 17, 2011), 1–3, 6 (the two structures, with companion loans “usually subordinate”; the Vermont Economic Development Authority’s companion loan program); Office of the Comptroller of the Currency, Frequently Asked Questions Regarding the State Small Business Credit Initiative, attachment to OCC Bulletin 2024-1 (Jan. 2024), 6; U.S. Department of the Treasury, State Small Business Credit Initiative Fact Sheet (June 2023), app. A (program inventory, including West Virginia’s Subordinated Debt Fund and Wisconsin’s WHEDA Subordinate Loan Participation Program).
51. U.S. Department of the Treasury, SSBCI Quarterly Report through September 30, 2023 (Dec. 18, 2023) (the Finance Authority of Maine’s Grow Maine loan participation financing the Bell Street Builders cooperative conversion).
52. SSBCI Program Profile: Loan Participation Program, 3 (the state may fund up to 80 percent of a loan; the private lender must retain at least 20 percent of its own capital at risk).
53. At the state level, these contingent liabilities must still be fully appropriated: a state generally must reserve or appropriate against its guarantee and reserve exposure when the commitment is made, so a credit enhancement carries a real, scored cost at enactment.
54. U.S. Department of the Treasury, Report on Capital Access Programs (2001) (the first CAP established by Michigan in 1986; surveying programs across some two dozen states and municipalities).
55. Small Business Jobs Act of 2010, Pub. L. No. 111-240, §§ 3005–3006 (codified at 12 U.S.C. §§ 5704–5705) (defining approved state capital access programs separately from all other credit support programs).
56. Council for Community and Economic Research, SSBCI 2.0’s Implementation Across States and Other Jurisdictions (Aug. 2023) (analyzing Treasury capital program summaries as of June 2023: capital access programs at roughly 4 percent of allocated capital program funds across 12 programs; loan participation at roughly 28 percent).
57. Colorado Housing and Finance Authority, Cash Collateral Support Program Guidelines (the standard deposit of the lesser of 35 percent of the loan, $1 million, or the demonstrated shortfall; the enhanced employee ownership tier of up to the lesser of 80 percent or $3 million; the last loss structure).
58. Council for Community and Economic Research, SSBCI 2.0’s Implementation Across States and Other Jurisdictions (Aug. 2023) (28 loan guarantee programs drawing roughly 17 percent of allocated capital program funds, approximately $1.4 billion, as of June 2023).
59. California Infrastructure and Economic Development Bank, Small Business Loan Guarantee Program materials (guarantees of up to 80 percent of loans and lines of credit up to $20 million; a maximum guaranteed amount of $5 million; delivered through participating financial development corporations).
60. Business Oregon, Credit Enhancement Fund program materials (coverage typically up to 80 percent of the loan; maximum insurance exposure of $6 million per loan).
61. Georgia Department of Community Affairs, Small Business Credit Guaranty program materials (a 50 percent guarantee on loans up to $1 million).
62. SSBCI Program Profile: Loan Participation Program, 1 (SBA-guaranteed loans may not be purchased in participation; a state may make its own direct loan subordinate to an SBA-guaranteed loan).
63. Bank of North Dakota, value-added agriculture rate buydown program (buying down the rate on a loan a borrower has secured from an outside lender), as described in Charles Yang et al., Reimagining Economic Development, Center for Public Enterprise (June 2025), 8.
64. Ohio Treasurer, GrowNOW program (Ohio Revised Code § 135.61 caps linked deposits at twelve percent of the state portfolio); Missouri State Treasurer, MOBUCK$ program; on the Indiana ESOP Initiative, Michael Taylor, “Improving State-Level Policy Advocacy for Employee Ownership,” Beyster Institute (June 2012); Community-Wealth.org, “Indiana Begins ESOP Support Program”; Indiana Center for Employee Ownership, State Advocacy Archive.
65. Ownership Capital Lab, 2025 State of the Employee Ownership Fund Marketplace (Dec. 2025) (approximately two dozen active or emerging employee ownership funds managing roughly $865 million in combined assets; anchor and institutional capital identified as the binding constraint).
66. Illinois Growth and Innovation Fund, 2024 Annual Report (a net internal rate of return of 10.4 percent and a net multiple of 1.37 as of December 31, 2024).
67. Oklahoma House Bill 2765 (2025), codified at 62 Okla. Stat. § 89.2 (“Invest in Oklahoma,” investing the Treasurer’s cash-balance amounts in Oklahoma-based private equity, venture, and growth funds); California Infrastructure and Economic Development Bank (IBank), venture-fund limited-partner investments.
68. Illinois House Bill 4955, 104th General Assembly (2026).
69. Rosen and Rodgers, Default Rates on Leveraged ESOPs, 2009–2013.
70. SECURE 2.0 Act of 2022, Pub. L. No. 117-328, div. T, § 114 (extending the § 1042 election to sales of S corporation stock to an ESOP, capped at 10 percent of the gain, effective for sales after December 31, 2027); on the basis carryover and step-up at death, 26 U.S.C. §§ 1042(d), 1014.
71. Internal Revenue Code § 1042 (capital gains deferral on a sale to an ESOP or eligible cooperative holding at least 30 percent after the sale, with reinvestment in qualified replacement property); the S corporation ESOP exemption (the ESOP trust is taxexempt, so a wholly ESOP-owned S corporation pays no federal income tax); and § 404 (deductibility of contributions used to service ESOP acquisition debt).
72. Missouri Revised Statutes § 143.114 (a 50 percent deduction on a sale to a Missouri ESOP owning at least 30 percent, made permanent in 2023); Nebraska Revised Statutes §§ 77-2715.08–.09 (a one-time lifetime exclusion, with each ESOP participant counted as a shareholder); Iowa Code § 422.7(42) (2026) (an exclusion phasing to 100 percent of the gain for tax years beginning in 2025, with no ESOP or 30 percent requirement, replacing the 50 percent ESOP-specific deduction enacted in 2012 and repealed in 2018); Colorado House Bill 25-1021 (a subtraction for an owner who sells at least 20 percent to a qualified employee-owned business).
73. Colorado Revised Statutes § 39-22-542 (conversion cost credit, raised to 75 percent of qualifying costs in 2025, with companion credits under § 39-22-542.5); Revised Code of Washington § 82.04.4488 (a business and occupation credit of 50 percent of conversion costs; credits not earnable after June 30, 2025 under ch. 366, Laws of 2025); Colorado worker-cooperative income subtraction.