State committee hears how ESOPs and employee ownership trusts work as Washington rolls out tax-credit program

The Consumer Protection and Business Committee heard a briefing March 4, 2025, on employee ownership models and the state’s new employee ownership program, with experts explaining how employee stock ownership plans (ESOPs) and employee ownership trusts (EOTs) operate and how Washington’s tax-credit program will be administered.

Corey Rosen, founder of the National Center for Employee Ownership, told the committee that ESOPs are retirement-style trusts that hold company shares on behalf of employees and that “the employees don't buy the shares. The company is buying the shares out of the future profits that it generates.” He described ESOP mechanics — a company sets up a trust that buys shares from owners, allocations are made annually based on compensation or a level formula, vesting typically occurs over up to six years, and departing employees receive a repurchase payment at fair market value determined by an appraisal. Rosen emphasized that ESOPs are governed by ERISA and recommended independent trustees and appraisals to avoid self-dealing.

Linda Lee Womack, managing director of the Office of Economic Development and Competitiveness at the Washington State Department of Commerce, outlined the state program created by the legislature in 2023 (Senate Bill 5096). The Commerce program offers a business-and-occupation (B&O) tax credit to reimburse…