Cooperatives play an important role in U.S. history, in agriculture and beyond. Historically, they served to address general economic problems of under- or overproduction, business uncertainty, and excessive costs, while giving more control of resources to those who produce them. Cooperatives continue to be a tool to support fair economic development and growth in rural communities.
Support Agriculture and Worker Cooperatives
There are several types of cooperatives, and nearly any business or other relationship can be established as a cooperative. Financial and farmer cooperatives that support agricultural producers are well-established, and some states are exploring ways to expand worker cooperatives to support economic recovery, build community wealth, strengthen retirement security, improve job satisfaction, and ensure that rural businesses continue following an ownership transition.
- State: Recognize, establish, and support producer and worker cooperatives.
- State: Provide financial incentives and opportunities for cooperative development.
Colorado, often seen as a model for cooperative incorporation, has statutory language on renewable energy cooperatives (Colo. Rev. Stat. § 7-56-210), health care coverage cooperatives (Colo. Rev. Stat. § 10-16-1004), and uniform limited cooperative associations (Colo. Rev. Stat. § 7-58-104).
California (2015 CA AB 816), Illinois (2019 IL HB 3663), Massachusetts (MA Gen. Laws Chapter 157A), Nevada (2019 NV AB 432), and Virginia (2020 VA HB 55) have passed legislation to effectively recognize and establish worker cooperatives as a distinct category of cooperative associations.
Some states have expanded membership eligibility. A bill passed in Connecticut (2018 CT HB 5442) allows a nonprofit corporation to become a member of a worker cooperative and to serve on the cooperative’s board, and a bill in New York (2021 NY SB S 6394) would have added microbusiness worker cooperatives with five or fewer full-time employees to the list of eligible worker cooperatives to receive financial assistance.
Colorado (2021 CO HB 1311) recently created a temporary income tax credit for the transaction costs to convert the business to a worker-owned cooperative, an employee stock ownership plan (ESOP), or an employee ownership trust.
Missouri (2016 MO HB 2030) passed an income tax deduction for the net capital gain from the sale or exchange of employer securities to ESOP.
Massachusetts (MA Gen. Laws Chapter 23D § 16) has an employee-ownership revolving loan fund.
Massachusetts (2021 MA SB 261) is also one state that proposed funding a state employee ownership center, which would have provided education, outreach, and technical assistance to businesses interested in the cooperative model.
States have integrated employee ownership into existing technical assistance and support provided to businesses by state agencies, such as in Colorado (Colo. Rev. Stat. § 24-48.5-102), Montana (Mont. Code Ann. § 90-5-304), New York (N.Y. Econ. Dev. Law § 104-A), and Washington (Wash. Rev. Code § 43.63A.230).