[Congressional Record Volume 148, Number 105 (Monday, July 29, 2002)]
[Extensions of Remarks]
[Pages E1418-E1419]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




AMENDING THE INTERNAL REVENUE CODE OF 1986 TO ENCOURAGE THE GRANTING OF 
                         EMPLOYEE STOCK OPTIONS

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                           HON. AMO HOUGHTON

                              of new york

                    in the house of representatives

                         Friday, July 26, 2002

  Mr. HOUGHTON. Mr. Speaker, I am pleased to join my colleague from 
Ohio, Mr. Hoghton, in introducing our bill, the Workplace Employee 
Stock Option Act of 2002, that would benefit working men and women who 
would receive a new type of stock option under new section 423(d) of 
the Internal Revenue Code. This bill is an updated and improved version 
of bills I introduced in the 105th and 106th Congresses.
  We have been through difficult times in the past year. The financial 
downturn has resulted

[[Page E1419]]

from a variety of questionable accounting practices by a number of 
companies. Unfortunately, stock options of all types have been tarred 
by a common brush. This proposal is a new approach to options. In spite 
of current problems, it is good for both employers and employees if 
workers are also owners of the business.
  Congress is considering legislation to impose new laws on 
corporations and accountants. Volume is reasonably intense in the 
debate on the advisability of expensing the value of stock options when 
they are granted. Expensing of options in financial statements may 
happen--even though there are several unresolved issues. If expensing 
happens, one hopes that we will leave it to the FASB and SEC to develop 
the best approach. Having said that, we would propose that the new type 
of option contained in this bill would be exempt from such valuation as 
a noncompensatory plan. Why? The option would be priced at market, 
fully available to nearly all employees, as well as management, on a 
nondiscriminatory basis, and subject to a relatively modest individual 
dollar cap. If we require expensing of such a widely held benefit, 
employers simply will not offer it.
  The highlights of the bill include: (1) substantially all full-time 
U.S. employees would be eligible to participate, (2) the option price 
would be 100% of the fair market value at time of grant, the maximum 
annual amount of a grant per employee would be $11,000 (same as indexed 
401 (k) amount), (4) no tax to the employee at time of grant or 
exercise, including AMT, (5) at time of sale the employee would receive 
ordinary income to the extent of the fair market value at time of 
exercise, with any excess being capital gain, and (6) the employer's 
deduction would be the fair market value at time of exercise (same 
amount as employee reports at sale).
  The ever-widening compensation gap between the highly paid and the 
nation's work force is cause for great concern. Once again, let us 
emphasize: This new 423(d) option is designed for working men and 
women, whose everyday, solid work enhances the company's overall 
performance. This is a broad-based stock option program. Employees 
ought to be able to build their wealth beyond that which they would 
ordinarily receive from a salary or bonus. This proposal would add 
another leg on the stool for employee retirement by providing an 
additional means of accumulating assets. It would encourage the long-
term holding of stock by deferring all tax until sale.
  We encourage our colleagues to join in cosponsoring this legislation.

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