Gov. Jared Polis, joined by some of the employee-owners of Hercules Industries in Denver, announced the state’s Office of Economic Development and International Trade will start accepting applications for a new tax credit in the new year.

The credit is intended to help Colorado-headquartered businesses that want to convert to an employee ownership model cover some of the conversion costs, such as accountants and attorney fees. The conversion applies to worker-owned cooperatives, an employee stock ownership plan or an employee ownership trust. The credit applies to the company’s state income taxes. 

The state tax credit requires a 50% match from the company and its employees for the conversion costs. For employee stock ownership plans, the tax credit max is $100,000. For trusts, the limit is $25,000. 

The program will run from Jan. 1, 2022 through Jan. 1, 2027, with the tax credit approved by state lawmakers through HB 21-1311.

Polis is a big fan of these employee-owned businesses, pointing to his own experience as a business owner prior to running for Congress. During Wednesday’s news conference, he noted that “in the dozen or so companies I founded in the private sector, they all incorporated stock options, as was the norm in the tech industry.” When his company ProFlowers was sold, some of the early hires made hundreds of thousands of dollars from that sale, he said. That also happened with New Belgium Brewery.

Polis also noted he kicked off his 2018 bid for governor at an employee-owned company, Sav-A-Lot, in Colorado Springs. More recently, Leaning Tree, a Boulder greeting card company, also converted to employee ownership, he said. HB 1311‘s fiscal note said there are 131 businesses with an employee stock ownership plan and 34 worker-owned cooperatives operating in Colorado. 

According to Polis, this kind of ownership helps build value in a company and aligns the incentives of the workers with managers and shareholders, he said.

“If you want to change a company’s culture and retain employees, employee ownership gives the company a competitive edge,” he said.

The goal is to make Colorado a leader in employee ownership, he added.

Hercules, which has been in business for 60 years, converted to 100% employee ownership on Sept. 30, 2019, according to company President Andy Newland. The company, a manufacturer and distributor of heating and cooling supplies, is headquartered in Colorado with locations in five other states and with 560 employees. Half of those employees are in Colorado.

“By having this opportunity, we can recruit better people, retain people, and I tell the young people, ‘if you stay 20 years, you’ll have two retirements: your 401(k) and your stock options,'” said Mark Kell, who has worked for Hercules for 20 years. 

The company has about 40 vacancies at the moment. Roxanne Harris of Hercules said the turnover is a little higher in the warehouse, “but once someone is here for two years, they’re here for life.”

OEDIT Executive Director Pat Meyers, who also has experience with businesses that are employee-owned, added that “in these days, when you need your employees more than ever to be invested in the company and in its success and recovery, employee ownership makes all the difference in the world.”

Applications for the tax credit can be made through OEDIT’s Colorado Employee Ownership Office.