[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[H.R. 2788 Introduced in House (IH)]







105th CONGRESS
  1st Session
                                H. R. 2788

  To amend the Internal Revenue Code of 1986 to promote the grant of 
      incentive stock options to nonhighly compensated employees.


_______________________________________________________________________


                    IN THE HOUSE OF REPRESENTATIVES

                            October 31, 1997

 Mr. Houghton introduced the following bill; which was referred to the 
                      Committee on Ways and Means

_______________________________________________________________________

                                 A BILL


 
  To amend the Internal Revenue Code of 1986 to promote the grant of 
      incentive stock options to nonhighly compensated employees.

    Be it enacted by the Senate and House of Representatives of the 
United States of America in Congress assembled,

SECTION 1. SPECIAL RULES FOR INCENTIVE STOCK OPTIONS FOR NONHIGHLY 
              COMPENSATED EMPLOYEES.

    (a) In General.--Section 422 of the Internal Revenue Code of 1986 
(relating to incentive stock options) is amended by adding at the end 
the following new subsection:
    ``(e) Special Rules for Incentive Stock Options for Nonhighly 
Compensated Employees.--
            ``(1) In general.--In the case of an incentive stock option 
        granted to an individual who, at the time the option is 
        granted, is not a highly compensated employee of any 
        corporation referred to in subsection (a)(2), the requirements 
        of paragraph (1) of subsection (a) shall be treated as met with 
        respect to the transfer of stock to such individual pursuant to 
        the exercise of such option if either of the requirements of 
        such paragraph are met.
            ``(2) Rules to apply to employees of certain employers.--
                    ``(A) In general.--Paragraph (1) shall also apply 
                to options granted by a qualified employer to highly 
                compensated employees.
                    ``(B) Qualified employer.--For purposes of 
                subparagraph (A), an employer is a qualified employer 
                with respect to options granted during a calendar year 
                if at least 50 percent of the aggregate fair market 
                value of stock with respect to which incentive stock 
                options (determined without regard to subsection (d)) 
                are granted during such calendar year by such employer 
                (and its parent and subsidiary corporations) are 
                granted to individuals who are not highly compensated 
                employees.
            ``(3) Increase in annual limitation.--The limitation under 
        subsection (d) shall be increased by the lesser of $100,000 or 
        the fair market value of the options to which paragraph (1) 
        applies.
            ``(4) Highly compensated employees.--For purposes of this 
        subsection, the term `highly compensated employee' has the 
        meaning given to such term by section 414(q).''
    (b) Exception From Minimum Tax Preference.--Paragraph (3) of 
section 56(b) of such Code (relating to adjustments applicable to 
individuals) is amended by adding at the end the following new 
sentence: ``The preceding provisions of this paragraph shall not apply 
to any transfer of stock pursuant to an option to which subparagraphs 
(A) and (B) of section 422(e)(1) apply.''
    (c) Effective Date.--The amendments made by this section shall 
apply to options granted after the date of the enactment of this Act.
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