[Congressional Bills 105th Congress]
[From the U.S. Government Publishing Office]
[S. 576 Introduced in Senate (IS)]







105th CONGRESS
  1st Session
                                 S. 576

 To amend the Internal Revenue Code of 1986 to provide that corporate 
 tax benefits from stock option compensation expenses are allowed only 
    to the extent such expenses are included in corporate accounts.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             April 15, 1997

 Mr. Levin (for himself and Mr. McCain) introduced the following bill; 
     which was read twice and referred to the Committee on Finance

_______________________________________________________________________

                                 A BILL


 
 To amend the Internal Revenue Code of 1986 to provide that corporate 
 tax benefits from stock option compensation expenses are allowed only 
    to the extent such expenses are included in corporate accounts.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Ending Double Standards for Stock 
Options Act''.

SEC. 2. REQUIREMENTS FOR CONSISTENT TREATMENT OF STOCK OPTIONS BY 
              CORPORATIONS.

    (a) Consistent Treatment for Tax Deduction.--Section 83(h) of the 
Internal Revenue Code of 1986 (relating to deduction of employer) is 
amended by adding at the end the following new paragraph:
            ``(2) Special rules for property transferred pursuant to 
        stock options.--
                    ``(A) In general.--In the case of property 
                transferred in connection with a stock option, the 
                deduction otherwise allowable under paragraph (1) shall 
                not exceed the amount the taxpayer has treated as an 
                expense for the purpose of ascertaining income, profit, 
                or loss in a report or statement to shareholders, 
                partners, or other proprietors (or to beneficiaries). 
                In no event shall such deduction be allowed before the 
                taxable year described in paragraph (1).
                    ``(B) Exception for broad-based option programs.--
                Subparagraph (A) shall not apply to property 
                transferred in connection with a stock option if, at 
                the time the stock option was granted--
                            ``(i) substantially all employees of the 
                        corporation issuing such stock option were 
                        eligible to receive substantially similar stock 
                        options from such corporation,
                            ``(ii) no individual performing services 
                        for such corporation received more than 20 
                        percent of the total number of stock options 
                        granted by such corporation during the taxable 
                        year, and
                            ``(iii) at least 50 percent of the total 
                        number of stock options granted by such 
                        corporation during such taxable year were 
                        issued to employees other than individuals 
                        performing executive or management services for 
                        such corporation.
                    ``(C) Employees covered.--For purposes of this 
                paragraph, an employee shall be taken into account only 
                if--
                            ``(i) the employee is a full-time employee, 
                        and
                            ``(ii) substantially all of the services 
                        performed by the employee for the corporation 
                        are performed within the United States.
                    ``(D) Special rules for controlled groups.--The 
                Secretary shall prescribe rules for the application of 
                this paragraph in cases where the stock option is 
                granted by a parent or subsidiary corporation (within 
                the meaning of section 424) of the employer 
                corporation.''
    (b) Consistent Treatment for Research Tax Credit.--Section 
41(b)(2)(D) of the Internal Revenue Code of 1986 (defining wages for 
purposes of credit for increasing research expenses) is amended by 
inserting at the end the following new clause:
                            ``(iv) Special rule for stock options and 
                        stock-based plans.--The term `wages' shall not 
                        include any amount of property transferred in 
                        connection with a stock option and required to 
                        be included in a report or statement under 
                        section 83(h)(2) until it is so included, and 
                        the portion of such amount which may be treated 
                        as wages for a taxable year shall not exceed 
                        the amount of the deduction allowed under 
                        section 83(h) for such taxable year with 
                        respect to such amount.''
    (c) Conforming Amendments.--Section 83(h) of the Internal Revenue 
Code of 1986 is amended by striking ``In the case of'' and inserting:
            ``(1) In general.--In the case of''.
    (d) Effective Date.--The amendments made by this section shall 
apply to property transferred and wages provided on or after the date 
of the enactment of this Act, pursuant to stock options granted on or 
after such date.
                                 <all>