[Congressional Bills 107th Congress]
[From the U.S. Government Publishing Office]
[S. 1940 Introduced in Senate (IS)]







107th CONGRESS
  2d Session
                                S. 1940

 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 a corporation's financial 
                              statements.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                           February 13, 2002

Mr. Levin (for himself, Mr. McCain, Mr. Fitzgerald, Mr. Durbin, and Mr. 
    Dayton) 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 a corporation's financial 
                              statements.

    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 the Double Standard 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--
            (1) by striking ``In the case of'' and inserting:
            ``(1) In general.--In the case of'', and
            (2) 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) 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) 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.
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