What is an “Eligible Worker Owned Co-op” (EWOC)?
An EWOC is special type of co-op (as defined in the tax code) that permits selling owners to defer payment of capital gains tax on the proceeds of the stock they sell to a worker co-op, if the proceeds are invested in domestic stock. If the reinvestment stock is in the owners’ estate upon death, the family never pays the capital gains tax.
To qualify as an EWOC, a worker co-op must have these features:
- A majority of the co-op’s members must be company employees;
- A majority of the co-op’s voting stock must be owned by co-op members;
- A majority of the board of directors must be elected by the members on a 1 vote per person basis, and
- A majority of earnings and losses are allocated to members on the basis of their work, their capital contributions or a combination of both.