[Congressional Record Volume 147, Number 112 (Friday, August 3, 2001)]
[Senate]
[Page S8958]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]

      By Mrs. CLINTON (for herself and Mr. Roberts):
  S. 1383. A bill to amend the Internal Revenue Code of 1986 to clarify 
the treatment of incentive stock options and employee stock purchases; 
to the Committee on Finance.
  Mrs. CLINTON. Mr. President, I am pleased to introduce today a bill 
to support the efforts of the many companies in New York and elsewhere 
who grant stock options to their employees. Over the past three 
decades, companies have increasingly used stock options to attract and 
motivate employees. These companies give their workers the right to 
purchase company stock, at a small discount from the listed price, 
through Employee Stock Purchase Plans, ESPP and Incentive Stock 
Options, ISO. Employees stock ownership has been shown to motivate 
workers and enhance relationship between management and workers. 
Indeed, for many workers, these plans are the only way to amass any 
assets.
  For nearly thirty years, the Internal Revenue Service, IRS has taken 
the position that income from these stock options is not subject to 
employment taxes. However, recent audits and rulings on individual 
companies have raised the troubling prospect that the IRS may now 
reverse its policy.
  ESPPs and ISOs were created by Congress to provide tools to build 
strong companies through increased employee ownership of company stock. 
The purpose of the bipartisan bill I am introducing today, with Senator 
Roberts, is to clarify that it was not the intent of Congress to dilute 
these incentives by requiring employment tax withholding when the stock 
is purchased. While the IRS has in place a moratorium until January 1, 
2003 on assessing employment taxes on stock options, we must take 
action to eliminate any uncertainty for companies and workers as to 
whether options are subject to withholding taxes.
  Again, the legislation I am introducing would clarify that the 
difference between the exercise price and the fair market value of 
stock offered by the ISO and ESPP is excluded from employment taxes. In 
addition, wage withholding is not required on disqualifying 
dispositions of ISO stock or on the fifteen percent discount offered to 
employees by ESPPs.
  I urge my colleagues to join me in cosponsoring this legislation.
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