Empowering Employees through Stock Ownership Act 2016-09-22 Passed House amended (This measure has not been amended since it was reported to the House on September 16, 2016. The summary of that version is repeated here.)

Empowering Employees through Stock Ownership Act

(Sec. 2) This bill amends the Internal Revenue Code to allow an employee to elect to defer, for income tax purposes, income attributable to certain stock transferred to the employee by an employer.

The employee may defer the inclusion of income from the stock until the year that includes the earliest of the dates on which:

  • the stock becomes transferable;
  • the employee becomes an excluded employee;
  • stock of the corporation becomes readily tradable on an established securities market;
  • seven years have passed after the rights of the employee in the stock are transferable or are not subject to a substantial risk of forfeiture, whichever occurs earlier; or
  • the employee revokes the election with respect to the stock.

The stock must meet specified requirements and be transferred to the employee from an eligible corporation in connection with the performance of services as an employee.

A corporation is eligible if: (1) no stock of the corporation or a predecessor of the corporation is readily tradable on an established securities market during any preceding calendar year, and (2) it has a written plan under which at least 80% of all employees who provide services to the corporation in the United States (or a U.S. possession) are granted stock options, or restricted stock units, with the same rights and privileges to receive qualified stock.

Employees are excluded if they: (1) are a 1% owner, the chief executive officer, or the chief financial officer of the corporation or have been at any time during the 10 preceding calendar years; (2) are a family member of the specified individuals; or (3) have been one of the four highest compensated officers of the corporation during any of the 10 preceding taxable years.

The corporation transferring stock must notify employees regarding the option of deferring income and meet specified withholding and reporting requirements.

]]> 2016-09-16 Reported to House amended Empowering Employees through Stock Ownership Act

(Sec. 2) This bill amends the Internal Revenue Code to allow an employee to elect to defer, for income tax purposes, income attributable to certain stock transferred to the employee by an employer.

The employee may defer the inclusion of income from the stock until the year that includes the earliest of the dates on which:

  • the stock becomes transferable;
  • the employee becomes an excluded employee;
  • stock of the corporation becomes readily tradable on an established securities market;
  • seven years have passed after the rights of the employee in the stock are transferable or are not subject to a substantial risk of forfeiture, whichever occurs earlier; or
  • the employee revokes the election with respect to the stock.

The stock must meet specified requirements and be transferred to the employee from an eligible corporation in connection with the performance of services as an employee.

A corporation is eligible if: (1) no stock of the corporation or a predecessor of the corporation is readily tradable on an established securities market during any preceding calendar year, and (2) it has a written plan under which at least 80% of all employees who provide services to the corporation in the United States (or a U.S. possession) are granted stock options, or restricted stock units, with the same rights and privileges to receive qualified stock.

Employees are excluded if they: (1) are a 1% owner, the chief executive officer, or the chief financial officer of the corporation or have been at any time during the 10 preceding calendar years; (2) are a family member of the specified individuals; or (3) have been one of the four highest compensated officers of the corporation during any of the 10 preceding taxable years.

The corporation transferring stock must notify employees regarding the option of deferring income and meet specified withholding and reporting requirements.

]]> 2016-07-11 Introduced in House Empowering Employees through Stock Ownership Act

This bill amends the Internal Revenue Code to allow an employee to elect to defer, for income tax purposes, income attributable to certain stock transferred to the employee by an employer.

The employee may defer the inclusion of income from the stock until the year that includes the earliest of the dates on which:

  • the stock is sold, exchanged, or otherwise transferred;
  • the employee becomes an excluded employee;
  • stock of the corporation becomes readily tradable on an established securities market;
  • seven years have passed after the rights of the employee in the stock are transferable or are not subject to a substantial risk of forfeiture, whichever occurs earlier; or
  • the employee elects to include the amount in income.

The stock must meet specified requirements and be transferred to the employee from an eligible corporation in connection with the performance of services as an employee.

A corporation is eligible if: (1) no stock of the corporation is readily tradable on an established securities market during the year or any preceding year, and (2) it has a written plan under which at least 80% of all employees have the same rights and privileges to receive stock for the year.

Employees are excluded if they are or have been: (1) a 1% owner, the chief executive officer, or the chief financial officer of the corporation; (2) a family member of the specified individuals; (3) or one of the four highest compensated officers of the corporation.

The corporation transferring stock must notify employees regarding the option of deferring income and meet specified withholding and reporting requirements.

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