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SB 2809

AN ACT RELATING TO TAXATION -- EMPLOYEE OWNERSHIP TAX CREDIT

2026 Regular Session Introduced by Frank Ciccone and 1 co-sponsor

Rhode Island offers a tax credit (up to 50% of conversion/expansion costs, caps apply) to businesses transitioning to employee ownership structures (ESOP, EOT, or similar).

05/12/2026 Committee heard
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WeVote Research Nonpartisan
Bill Summary · SB 2809

Summary of SB 2809 (Rhode Island, 2026) — Employee Ownership Tax Credit

Purpose and intent

  • Establishes a state income tax credit to incentivize businesses to transition to employee ownership or to expand employee ownership structures.
  • Aims to create or retain jobs, preserve community investment, and distribute wealth more broadly among employees.

Key provisions and changes

  • New chapter added to Title 44 (Taxation): Chapter 73 — Employee Ownership Tax Credit.

  • Definitions (44-73-1):

    • “Alternate equity structure” includes employee ownership mechanisms such as an employee stock ownership plan (ESOP), LLC membership, phantom stock, profit interest, restricted stock, stock appreciation rights, stock options, or synthetic equity. Requirements include:
    • Minimum 20% of eligible workers must be granted rights or participate (20% threshold).
    • At least 20% of eligible workers must participate.
    • At least 20% of fully diluted securities or 20% of net profits allocated to participating workers.
    • Participating workers must have informational, decision-making, and non-financial rights equal to or greater than those of common stockholders or residual interest holders.
    • “Conversion costs”: professional services for transitioning to ESOP, employee ownership trust (EOT), or worker-owned structure; includes cost for cost certification audits.
    • Other defined terms: Department of Revenue guidance, employee ownership trust, ESOP, expansion costs, office (as the business development center), owner, qualified business, qualified employee-owned business, and worker-owned cooperative.

  • Tax credits (44-73-2):

    • Effective for tax years starting on/after Jan 1, 2026 and ending before Jan 1, 2029.
    • Conversion costs credits (up to 100k per category, subject to caps): 1) Up to 50% of conversion costs for converting to a worker-owned cooperative or EOT (cap: $100,000). 2) Up to 50% of conversion costs for converting to an ESOP (cap: $100,000). 3) Up to 50% of conversion costs for converting to an alternate equity structure (cap: $25,000).
    • Expansion costs credits (up to 50% of expansion costs, cap: $25,000) for expanding an existing employee-owned structure.
    • Eligibility conditions:
    • Expansion must increase ownership by at least 20% of total ownership of the qualified business.
    • For C Corporations, the credit goes to the qualified business or the employee-owned business.
    • For Partnerships or S Corporations, the credit goes to the business owner(s).

  • Procedure and administration (44-73-3):

    • Office (Rhode Island Department of Revenue) to issue guidelines covering:
    • Application requirements, eligible costs, certification standards, outreach, and access considerations.
    • Businesses must apply for a credit certificate; certificates are not guaranteed by submitting an application.
    • The office tracks complete applications, and issues certificates only if requirements are met.
    • Annual cap on certificates: up to $1,000,000 per tax year.

  • Claiming the credit (44-73-4):

    • Credit certificates must be attached to the business’s state income tax return to claim the credit.
    • If the credit exceeds the tax liability for the year, the excess may be refunded.

  • Other provisions (44-73-5):

    • Severability clause to ensure remaining provisions stand if any part is found unconstitutional or invalid.

  • Effective date (Section 3): Takes effect upon passage.

Who is affected

  • Qualified businesses considering or undergoing a transition to employee ownership structures (ESOP, EOT, worker-owned cooperatives, or alternate equity structures).
  • Business owners and management seeking to convert ownership to employee-driven models.
  • Employees in participating firms who gain ownership or enhanced rights through the specified structures.
  • Tax administration and small-business support entities (Office and Department of Revenue) for administration, guidance, and outreach.

Timelines and fiscal aspects

  • Credit availability active for tax years from January 1, 2026 through December 31, 2028 (ending just before 2029).
  • Annual funding cap for the program: $1,000,000 in tax credit certificates.
  • Credit percentages and cost caps are fixed as of definitions, with program guidance to be issued by the office.
  • Certification is prerequisite to claiming the credit; certificate issuance is subject to office review and annual cap.

Practical considerations

  • The bill directly ties the size of the credit to conversion and expansion costs, with generous support (up to 50% of costs) but with clear monetary caps.
  • It emphasizes worker participation thresholds (minimum 20% participation and rights) to qualify as an alternate structure.
  • It requires robust state guidance and outreach to ensure broad access and awareness among small businesses, including language-access considerations.

This summary covers the bill’s core purpose, major provisions, affected parties, and key procedural/timeline elements. If you’d like, I can provide a side-by-side comparison with similar programs in other states or a brief fiscal impact projection based on the stated caps.

Compiled from official sources — confirm details with the bill’s official record.

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