Our Policy Recommendations on Purpose Trust Ownership

New guidance for federal agencies and state legislators

In a new white paper we’ve been compiling for the last few months, we identify how federal and state-level policymakers can make to support the growth of purpose trust ownership. We’re excited to get this out into the world!

Background: Supported by a grant from Schmidt Futures, in partnership with Sandra Raafat from Common Trust, and with feedback from many of you dear readers, the EO+WD team has been gathering policy recommendations to support the growth of purpose trust ownership in the United States.

In context: As was clear from this year’s Employee Ownership Ideas Forum, employee ownership has some serious policy momentum.

• The ESOP Association, Lafayette Square Foundation, and the National Center for Employee Ownership push forward policy changes in support of employee stock ownership plans (ESOPs).

• The Democracy at Work Institute, The US Federation of Worker Cooperatives, and Project Equity focus on policy supportive of worker cooperatives.

The gap: Purpose trust ownership has lacked dedicated policy support, though the actors listed above have worked to include employee ownership trusts in their broad-based employee ownership legislation.

• One notable exception: Purpose Owned and Susan Gary worked together to codify stewardship trusts in Oregon and have supported legislative changes in Illinois and Texas.

• This report aims to fill that gap by offering recommendations to leaders of federal agencies, state-level policymakers, and local-level advocates.

In brief: Below is what we recommend; you can read the rest of the white paper here. Don’t miss the appendix on existing state-level policies.

Federal Policy Options

• Clarify IRS tax criteria for purpose trusts

• Enable seller participation in governance without estate tax impacts

• Implement estate and gift tax reductions and capital gains exemptions

• Fund SBA research into purpose trust impacts and best practices

• Issue clarifications on using SBA loans for transitioning to these structures

• Update the SCORE Mentor program to focus on business succession

• Pilot an SBA program offering loans for purpose trust transitions

• Exempt purpose trusts from personal loan guarantee requirements

• Ease CDFI lending to purpose trusts

• Embed employee ownership into well-funded workforce development programs through the upcoming WIOA reauthorization

State and Local Policy Options

• Waive rules against perpetuities and allow trusts without ascertainable beneficiaries

• Explore state-specific legislative models for purpose trusts

• Relax ownership requirements for purpose trust professional service businesses

• Extend employee ownership conversion tax credits to purpose trusts

• Include look-through provisions for purpose trusts in state contracting

• Establish employee ownership offices/commissions within economic development agencies, providing purpose trust transition resources and connections

• Boost awareness and adoption through local campaigns, workshops, incentives, and highlighting successful examples of purpose trust ownership

Go Deeper: Read the full white paper here. And for the design-minded readers in our audience, stand by for a more beautiful version—we just couldn’t wait to get it in your hands!

An AI-generated cityscape that allegedly includes the Texas capitol, the Louisiana capitol, the Washington state capitol, the Oregon capitol, and other state capitol buildings.