In 1982, David Ellerman and Peter Pitegoff, then of the Industrial Cooperative Association, drafted and helped pass Massachusetts General Law Chapter 157a, a statute for Employee Cooperative Corporations. At the time most worker cooperatives would incorporate either with an agriculture-centered cooperative statute or use the shell of a business corporation and transform it to a cooperative at the bylaw level. The new law sought to:
- convert some rights established within a business corporation to membership (personal) rights, rather than property rights, including the right to vote and the right to an equitable allocation of the net income, and
- establish a Mondragon-style system of internal capital accounts, which internally financed the business without significantly increasing its book value - or in turn, without increasing the cost of a new membership share for an incoming worker.
One adaptation from the Mondragon system that was requested from the MA bar was to allow some forms of non-voting outside stock to be held, in order for creative financing and to remove an obstacle for the gradual transition to cooperatives of more traditional firms.
MGL 157a was a zero-cost response to the hypermobility of capital which was deindustrializing the Northeast, and it was picked up and replicated in other states such as Connecticut, Maine, Vermont, New York, as well as Oregon and Washington.
A large concentration of worker cooperatives in the United States is in California, where those who wish to incorporate legally as cooperatives tend to adapt the consumer cooperative law. However an effort is underway to draft a new California statute based on a draft by Neil Helfman.
Above all these state statutes hovers IRS code Subchapter T with its shifting sands of patronage taxation. Subchapter T allows for businesses to file for the tax exemptions of cooperatives no matter what legal form they are incorporated as, so long as they are operating on a cooperative basis.