[Congressional Record Volume 162, Number 144 (Thursday, September 22, 2016)]
[House]
[Pages H5822-H5830]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
EMPOWERING EMPLOYEES THROUGH STOCK OWNERSHIP ACT
Mr. BRADY of Texas. Mr. Speaker, pursuant to House Resolution 875, I
call up the bill (H.R. 5719) to amend the Internal Revenue Code of 1986
to modify the tax treatment of certain equity grants, and ask for its
immediate consideration.
The Clerk read the title of the bill.
The SPEAKER pro tempore. Pursuant to House Resolution 875, the
amendment in the nature of a substitute recommended by the Committee on
Ways and Means, printed in the bill, is adopted, and the bill, as
amended, is considered read.
The text of the bill, as amended, is as follows:
H.R. 5719
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 ``Empowering Employees through
Stock Ownership Act''.
SEC. 2. TREATMENT OF QUALIFIED EQUITY GRANTS.
(a) In General.--
(1) Election to defer income.--Section 83 of the Internal
Revenue Code of 1986 is amended by adding at the end the
following new subsection:
``(i) Qualified Equity Grants.--
``(1) In general.--For purposes of this subtitle, if
qualified stock is transferred to a qualified employee who
makes an election with respect to such stock under this
subsection--
``(A) except as provided in subparagraph (B), no amount
shall be included in income under subsection (a) for the
first taxable year in which
[[Page H5823]]
the rights of the employee in such stock are transferable or
are not subject to a substantial risk of forfeiture,
whichever is applicable, and
``(B) an amount equal to the amount which would be included
in income of the employee under subsection (a) (determined
without regard to this subsection) shall be included in
income for the taxable year of the employee which includes
the earliest of--
``(i) the first date such qualified stock becomes
transferable (including transferable to the employer),
``(ii) the date the employee first becomes an excluded
employee,
``(iii) the first date on which any stock of the
corporation which issued the qualified stock becomes readily
tradable on an established securities market (as determined
by the Secretary, but not including any market unless such
market is recognized as an established securities market by
the Secretary for purposes of a provision of this title other
than this subsection),
``(iv) the date that is 7 years after the first date the
rights of the employee in such stock are transferable or are
not subject to a substantial risk of forfeiture, whichever
occurs earlier, or
``(v) the date on which the employee revokes (at such time
and in such manner as the Secretary may provide) the election
under this subsection with respect to such stock.
``(2) Qualified stock.--
``(A) In general.--For purposes of this subsection, the
term `qualified stock' means, with respect to any qualified
employee, any stock in a corporation which is the employer of
such employee, if--
``(i) such stock is received--
``(I) in connection with the exercise of an option, or
``(II) in settlement of a restricted stock unit, and
``(ii) such option or restricted stock unit was provided by
the corporation--
``(I) in connection with the performance of services as an
employee, and
``(II) during a calendar year in which such corporation was
an eligible corporation.
``(B) Limitation.--The term `qualified stock' shall not
include any stock if the employee may sell such stock to, or
otherwise receive cash in lieu of stock from, the corporation
at the time that the rights of the employee in such stock
first become transferable or not subject to a substantial
risk of forfeiture.
``(C) Eligible corporation.--For purposes of subparagraph
(A)(ii)(II)--
``(i) In general.--The term `eligible corporation' means,
with respect to any calendar year, any corporation if--
``(I) no stock of such corporation (or any predecessor of
such corporation) is readily tradable on an established
securities market (as determined under paragraph (1)(B)(iii))
during any preceding calendar year, and
``(II) such corporation has a written plan under which, in
such calendar year, not less than 80 percent of all employees
who provide services to such corporation in the United States
(or any possession of the United States) are granted stock
options, or restricted stock units, with the same rights and
privileges to receive qualified stock.
``(ii) Same rights and privileges.--For purposes of clause
(i)(II)--
``(I) except as provided in subclauses (II) and (III), the
determination of rights and privileges with respect to stock
shall be determined in a similar manner as provided under
section 423(b)(5),
``(II) employees shall not fail to be treated as having the
same rights and privileges to receive qualified stock solely
because the number of shares available to all employees is
not equal in amount, so long as the number of shares
available to each employee is more than a de minimis amount,
and
``(III) rights and privileges with respect to the exercise
of an option shall not be treated as the same as rights and
privileges with respect to the settlement of a restricted
stock unit.
``(iii) Employee.--For purposes of clause (i)(II), the term
`employee' shall not include any employee described in
section 4980E(d)(4) or any excluded employee.
``(iv) Special rule for calendar years before 2017.--In the
case of any calendar year beginning before January 1, 2017,
clause (i)(II) shall be applied without regard to whether the
rights and privileges with respect to the qualified stock are
the same.
``(3) Qualified employee; excluded employee.--For purposes
of this subsection--
``(A) In general.--The term `qualified employee' means any
individual who--
``(i) is not an excluded employee, and
``(ii) agrees in the election made under this subsection to
meet such requirements as determined by the Secretary to be
necessary to ensure that the withholding requirements of the
corporation under chapter 24 with respect to the qualified
stock are met.
``(B) Excluded employee.--The term `excluded employee'
means, with respect to any corporation, any individual--
``(i) who was a 1-percent owner (within the meaning of
section 416(i)(1)(B)(ii)) at any time during the 10 preceding
calendar years,
``(ii) who is or has been at any prior time--
``(I) the chief executive officer of such corporation or an
individual acting in such a capacity, or
``(II) the chief financial officer of such corporation or
an individual acting in such a capacity,
``(iii) who bears a relationship described in section
318(a)(1) to any individual described in subclause (I) or
(II) of clause (ii), or
``(iv) who has been for any of the 10 preceding taxable
years one of the 4 highest compensated officers of such
corporation determined with respect to each such taxable year
on the basis of the shareholder disclosure rules for
compensation under the Securities Exchange Act of 1934 (as if
such rules applied to such corporation).
``(4) Election.--
``(A) Time for making election.--An election with respect
to qualified stock shall be made under this subsection no
later than 30 days after the first time the rights of the
employee in such stock are transferable or are not subject to
a substantial risk of forfeiture, whichever occurs earlier,
and shall be made in a manner similar to the manner in which
an election is made under subsection (b).
``(B) Limitations.--No election may be made under this
section with respect to any qualified stock if--
``(i) the qualified employee has made an election under
subsection (b) with respect to such qualified stock,
``(ii) any stock of the corporation which issued the
qualified stock is readily tradable on an established
securities market (as determined under paragraph (1)(B)(iii))
at any time before the election is made, or
``(iii) such corporation purchased any of its outstanding
stock in the calendar year preceding the calendar year which
includes the first time the rights of the employee in such
stock are transferable or are not subject to a substantial
risk of forfeiture, unless--
``(I) not less than 25 percent of the total dollar amount
of the stock so purchased is deferral stock, and
``(II) the determination of which individuals from whom
deferral stock is purchased is made on a reasonable basis.
``(C) Definitions and special rules related to limitation
on stock redemptions.--
``(i) Deferral stock.--For purposes of this paragraph, the
term `deferral stock' means stock with respect to which an
election is in effect under this subsection
``(ii) Deferral stock with respect to any individual not
taken into account if individual holds deferral stock with
longer deferral period.--Stock purchased by a corporation
from any individual shall not be treated as deferral stock
for purposes of clause (iii) if such individual (immediately
after such purchase) holds any deferral stock with respect to
which an election has been in effect under this subsection
for a longer period than the election with respect to the
stock so purchased.
``(iii) Purchase of all outstanding deferral stock.--The
requirements of subclauses (I) and (II) of subparagraph
(B)(iii) shall be treated as met if the stock so purchased
includes all of the corporation's outstanding deferral stock.
``(iv) Reporting.--Any corporation which has outstanding
deferral stock as of the beginning of any calendar year and
which purchases any of its outstanding stock during such
calendar year shall include on its return of tax for the
taxable year in which, or with which, such calendar year ends
the total dollar amount of its outstanding stock so purchased
during such calendar year and such other information as the
Secretary may require for purposes of administering this
paragraph.
``(5) Controlled groups.--For purposes of this subsection,
all corporations which are members of the same controlled
group of corporations (as defined in section 1563(a)) shall
be treated as one corporation.
``(6) Notice requirement.--Any corporation that transfers
qualified stock to a qualified employee shall, at the time
that (or a reasonable period before) an amount attributable
to such stock would (but for this subsection) first be
includible in the gross income of such employee--
``(A) certify to such employee that such stock is qualified
stock, and
``(B) notify such employee--
``(i) that the employee may elect to defer income on such
stock under this subsection, and
``(ii) that, if the employee makes such an election--
``(I) the amount of income recognized at the end of the
deferral period will be based on the value of the stock at
the time at which the rights of the employee in such stock
first become transferable or not subject to substantial risk
of forfeiture, notwithstanding whether the value of the stock
has declined during the deferral period,
``(II) the amount of such income recognized at the end of
the deferral period will be subject to withholding under
section 3401(i) at the rate determined under section 3402(t),
and
``(III) the responsibilities of the employee (as determined
by the Secretary under paragraph (3)(A)(ii)) with respect to
such withholding.''.
(2) Deduction by employer.--Subsection (h) of section 83 of
the Internal Revenue Code of 1986 is amended by striking ``or
(d)(2)'' and inserting ``(d)(2), or (i)''.
(b) Withholding.--
(1) Time of withholding.--Section 3401 of the Internal
Revenue Code of 1986 is amended by adding at the end the
following new subsection:
``(i) Qualified Stock for Which an Election Is in Effect
Under Section 83(i).--For purposes of subsection (a),
qualified stock (as defined in section 83(i)) with respect to
which an election is made under section 83(i) shall be
treated as wages--
``(1) received on the earliest date described in section
83(i)(1)(B), and
``(2) in an amount equal to the amount included in income
under section 83 for the taxable year which includes such
date.''.
(2) Amount of withholding.--Section 3402 of such Code is
amended by adding at the end the following new subsection:
``(t) Rate of Withholding for Certain Stock.--In the case
of any qualified stock (as defined in section 83(i)) with
respect to which an election is made under section 83(i)--
``(1) the rate of tax under subsection (a) shall not be
less than the maximum rate of tax in effect under section 1,
and
``(2) such stock shall be treated for purposes of section
3501(b) in the same manner as a non-cash fringe benefit.''.
[[Page H5824]]
(c) Coordination With Other Deferred Compensation Rules.--
(1) Election to apply deferral to statutory options.--
(A) Incentive stock options.--Section 422(b) of the
Internal Revenue Code of 1986 is amended by adding at the end
the following: ``Such term shall not include any option if an
election is made under section 83(i) with respect to the
stock received in connection with the exercise of such
option.''.
(B) Employee stock purchase plans.--Section 423(a) of such
Code is amended by adding at the end the following flush
sentence:
``The preceding sentence shall not apply to any share of
stock with respect to which an election is made under section
83(i).''.
(2) Exclusion from definition of nonqualified deferred
compensation plan.--Subsection (d) of section 409A of the
Internal Revenue Code of 1986 is amended by adding at the end
the following new paragraph:
``(7) Treatment of qualified stock.--An arrangement under
which an employee may receive qualified stock (as defined in
section 83(i)(2)) shall not be treated as a nonqualified
deferred compensation plan solely because of an employee's
ability to defer recognition of income pursuant to an
election under section 83(i).''.
(d) Information Reporting.--Section 6051(a) of the Internal
Revenue Code of 1986 is amended by striking ``and'' at the
end of paragraph (13), by striking the period at the end of
paragraph (14) and inserting a comma, and by inserting after
paragraph (14) the following new paragraphs:
``(15) the amount excludable from gross income under
subparagraph (A) of section 83(i)(1),
``(16) the amount includible in gross income under
subparagraph (B) of section 83(i)(1) with respect to an event
described in such subparagraph which occurs in such calendar
year, and
``(17) the aggregate amount of income which is being
deferred pursuant to elections under section 83(i),
determined as of the close of the calendar year.''.
(e) Penalty for Failure of Employer To Provide Notice of
Tax Consequences.--Section 6652 of the Internal Revenue Code
of 1986 is amended by adding at the end the following new
subsection:
``(o) Failure to Provide Notice Under Section 83(i).--In
the case of each failure to provide a notice as required by
section 83(i)(6), at the time prescribed therefor, unless it
is shown that such failure is due to reasonable cause and not
to willful neglect, there shall be paid, on notice and demand
of the Secretary and in the same manner as tax, by the person
failing to provide such notice, an amount equal to $100 for
each such failure, but the total amount imposed on such
person for all such failures during any calendar year shall
not exceed $50,000.''.
(f) Effective Dates.--
(1) In general.--Except as provided in paragraph (2), the
amendments made by this section shall apply to stock
attributable to options exercised, or restricted stock units
settled, after December 31, 2016.
(2) Requirement to provide notice.--The amendments made by
subsection (e) shall apply to failures after December 31,
2016.
(g) Transition Rule.--Until such time as the Secretary (or
the Secretary's delegate) issue regulations or other guidance
for purposes of implementing the requirements of paragraph
(2)(C)(i)(II) of section 83(i) of the Internal Revenue Code
of 1986 (as added by this section), or the requirements of
paragraph (6) of such section, a corporation shall be treated
as being in compliance with such requirements (respectively)
if such corporation complies with a reasonable good faith
interpretation of such requirements.
The SPEAKER pro tempore. The bill shall be debatable for 1 hour,
equally divided and controlled by the chair and ranking minority member
of the Committee on Ways and Means.
The gentleman from Texas (Mr. Brady) and the gentleman from Michigan
(Mr. Levin) each will control 30 minutes.
The Chair recognizes the gentleman from Texas.
General Leave
Mr. BRADY of Texas. Mr. Speaker, I ask unanimous consent that all
Members have 5 legislative days to revise and extend their remarks and
to include any extraneous material on H.R. 5719, currently under
consideration.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Texas?
There was no objection.
Mr. BRADY of Texas. Mr. Speaker, I yield myself such time as I may
consume.
America's startup companies are a driving force behind our Nation's
dynamic and prosperous free enterprise system. Over the past century,
bold, innovative Americans have taken risks and started businesses of
all sizes that deliver opportunity for millions of middle class
families and workers.
We should do everything we can to help America's startups attract the
talented, hardworking employees they need to put their breakthrough
ideas into motion. One of the best things we can do is ensure that our
Tax Code supports American innovators. Our Tax Code must support--not
suppress--innovation, entrepreneurship, and economic freedom.
Today, I am honored to speak in support of legislation to do just
that, Congressman Erik Paulsen's Empowering Employees through Stock
Ownership Act.
{time} 1315
This bipartisan, bicameral legislation takes action to keep America
at the forefront of innovation by supporting startups and the workers
who help them thrive.
Right now many startup companies offer their workers stock options as
a portion of their compensation. This helps startups attract top talent
because they may not have the money to pay high salaries offered by
larger businesses.
The problem is, many startup workers can't exercise their stock
options because they don't make enough to afford the associated tax
payment. In addition, many startups are privately held, so there may
not be an available market for these workers to sell some of the stocks
so they can pay the tax.
Ultimately, this means a portion of a startup worker's compensation--
sometimes a significant portion--can be essentially out of reach. So
when a worker is considering whether to take a job at an exciting new
small business, this issue can make the opportunity in that company a
lot less attractive.
Congressman Paulsen's commonsense legislation fixes the problem. It
allows startup workers to defer the tax payment on their stock options
for 7 years or until there is an ability to sell the stock, whichever
comes first. Importantly, the bill includes provisions to ensure this
tax relief can only be utilized by workers who need it. Those who hold
large equity stakes in a startup or highly paid positions at the
company won't be eligible.
The bottom line is that by facilitating employee ownership, this bill
will not only help startups attract talent, it will allow their workers
to own a stake in that next breakthrough product or service.
Congressman Paulsen is a long-time champion of employee ownership,
free enterprise, and economic freedom--pillars of a strong American
economy. I want to thank him for his leadership on this important
bipartisan legislation, and I urge all my colleagues to join me in
supporting its passage.
The Empowering Employees through Stock Ownership Act is a smart,
bipartisan solution to help ensure that American startups will continue
to be a driving force behind American innovation, job growth, and
prosperity.
Mr. Speaker, I reserve the balance of my time, and I ask unanimous
consent that the gentleman from Minnesota (Mr. Paulsen) be permitted to
control the balance of my time.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Texas?
There was no objection.
Mr. LEVIN. Mr. Speaker, I yield myself such time as I may consume.
This bill addresses an issue that is worthy of being addressed. It
surely would be taken up as part of overall tax reform. But this bill
surely is not an emergency; and costing over $1 billion, it is not paid
for.
Today, as this House leaves, there has been no action on Flint. That
is an emergency--poisoned water, children at risk--and it is being
required that emergency funding for Flint be paid for. In contrast,
action on this bill is in no way an emergency, and it is not being
required to be paid for.
And still no attention to Zika. That is an emergency. It is spreading
while some here in D.C. are stalling. I quote Anthony Fauci, the
Director of the National Institute of Allergy and Infectious Diseases.
This is what he told one writer:
``First, we took money from other infections. We borrowed money from
ourselves from malaria and TB.
``When we ran out of that money, we started tapping into the Ebola
funds that we really should not be tapping into because we still need
them to keep the lid on Ebola.''
``When we ran out of that . . . Secretary . . . Burwell had to do
something she really did not want to do. She had to take money using
her transfer authority from cancer, diabetes, heart disease and mental
health and give it to us to be able to continue to prepare the sites
for the Zika vaccine trials that we will be performing.''
[[Page H5825]]
So Zika, that is an emergency. It is spreading here while we, as I
said, in D.C. are stalling. Here we go once again on this legislation,
not an emergency, not being paid for. I think the way the House
majority is handling this legislation and other legislation, or the
lack of it, is inexcusable and in some respects is immoral.
Let me read from the Statement of Administration Policy: ``The
Administration is committed to helping startups, boosting innovation,
and growing the economy, and is willing to work with the Congress on
fiscally responsible measures to achieve those goals. However, the
Administration strongly opposes H.R. 5719 because it would increase the
Federal deficit by $1 billion over the next ten years. Failing to pay
for new tax cuts is fiscally irresponsible.''
Mr. Speaker, working on stock options and the tax treatment of it is
one thing. Zika and Flint are orders of a different magnitude. For
these reasons and others, I urge a ``no'' vote.
I reserve the balance of my time.
Mr. PAULSEN. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, when you ask a small-business owner or an entrepreneur
about the challenge of starting a new business, they will often tell
you that the key to their success is keeping talented employees and
recruiting talented employees to keep their company moving forward.
Today we have an opportunity to help startup companies. The
Empowering Employees through Stock Ownership Act is a bipartisan
initiative that focuses on two simple but very important concepts:
keeping the United States on the forefront of innovation and promoting
employee ownership. I want to thank the gentleman from New York (Mr.
Crowley) for his bipartisan leadership on this issue as well.
Mr. Speaker, today our Tax Code is forcing many mid- and lower-level
employees at startup companies and businesses around the country to let
a very promising investment opportunity pass them by. Unlike employees
at larger, more established companies, startup employees are often
offered compensation in the form of stock options, a significant part
of their compensation. And it is a common practice for a business that
is developing a new and promising technology but is not yet profitable.
More and more employees of startups these days aren't exercising
their stock options, and that is because if they do, they get hit with
a tax bill from the IRS, a tax bill that can be unaffordable because
they don't have the cash available to make the tax payment which is due
immediately. As a result, employees are letting their stock options
expire, missing out on thousands and thousands of dollars that could
help them send their kids to college or plan for their retirement.
So here is a simple solution today, Mr. Speaker. The Empowering
Employees through Stock Ownership Act will let an employee defer their
tax payment for a reasonable period--7 years--or until there is a
market for their stock, which they could then sell to get the money
needed to pay the tax bill.
Many employees are drawn to startup businesses these days for the
opportunity to work on shaping the future, the next innovative solution
that can improve the lives of millions of people. It might be in health
care, it might be treating cancer, or it could be in developing new
mobile computer technology.
They are also drawn, though, to the chance and the opportunity to
have some ownership over this new idea. However, some are now choosing
to instead stay at or go to a larger, established company because they
know at a startup business they could face a very unfortunate tax
situation.
So to put it simply, Mr. Speaker, the Tax Code should not stand in
the way of developing new, life-changing technologies. We should help
these startups attract new employees and new talent and help those
employees chase their dreams to seek new, creative environments that
could lead to the next breakthrough innovation.
The legislation is also designed to promote employee ownership. Only
those individuals at startup businesses where similar stock options are
offered to 80 percent of their employees or more will be eligible for
the tax deferral provided in the bill. This will encourage businesses
to offer more of their employees an ownership stake, as well as serve
as a very important guardrail to prevent companies that only offer
stock options to a select few high-level employees from taking
advantage of any provisions in the legislation.
Importantly, the Empowering Employees through Stock Ownership Act
also contains several provisions to ensure that only those employees
who truly need tax deferral are actually able to obtain it. Individuals
that own more than 1 percent of a business, the CEO, the CFO, and the
four highest paid employees at a business are not eligible for
deferral.
Mr. Speaker, the Empowering Employees through Stock Ownership Act is
part of Leader McCarthy's Innovation Initiative here in the House. It
is endorsed by the Venture Capital Association, the Small Business and
Entrepreneurship Council, and dozens of businesses around the country.
I include in the Record their three letters of support.
National Venture Capital
Association,
September 7, 2016.
Hon. Erik Paulsen,
House of Representatives,
Washington, DC.
Hon. Joseph Crowley,
House of Representatives,
Washington, DC.
Dear Representatives Paulsen and Crowley: On behalf of our
nation's venture capital investors and the entrepreneurs they
support, I write to express our support for H.R. 5719, the
Empowering Employees through Stock Ownership Act, and to
thank you for your leadership on this important issue. This
legislation would allow startup employees to defer tax
liability on income arising from exercised but illiquid stock
options.
As you know, stock options are a critical tool for
attracting talented individuals to work at our nation's
startups. Employees are often compensated with stock options
as a promise that if the startup succeeds, everybody shares
in the gain. And, stock options are particularly important
for startups who are often cash strapped and using all
resources available to develop and build a novel product. But
as the U.S. capital markets have become more hostile to small
capitalization companies, increasingly startups are opting to
stay private longer rather than pursue an initial public
offering (IPO). This has given rise to challenges for
employees at our nation's startups when their stock options
vest without a liquid market to sell their shares in order to
pay the taxes that are due.
Your legislation to allow an additional period of time for
employees to defer taxes on exercised stock options is a
common sense solution to this challenge that will encourage
more talented Americans to help build today's startups into
tomorrow's Fortune 500 success stories. We must make new
company creation a national priority to compete in the 21st
century economy. Your bill will help us avoid a startup brain
drain by preserving the value of stock options for employees.
NVCA and its member firms look forward to working with you to
pass this legislation into law and protect the value of stock
options for startup employees. Again, thank you for your
leadership on this important issue.
Sincerely,
Bobby Franklin,
President and CEO.
____
Small Business &
Entrepreneurship Council,
September 19, 2016.
Hon. Erik Paulsen,
House of Representatives,
Washington, DC.
Hon. Joe Crowley,
House of Representatives,
Washington, DC.
Dear Representatives Paulsen and Crowley: The Small
Business & Entrepreneurship Council (SBE Council) and its
100,000 members nationwide strongly support H.R. 5719, the
Empowering Employees Through Stock Ownership Act.
Startup companies face many obstacles, including the
recruitment and retention of skilled employees. Employees at
startup companies often do not enjoy the higher salaries
offered at established companies, but are drawn to the idea
of helping to build an enterprise that is at the forefront of
the next innovation. At many startup companies, employees are
offered stock options or equity ownership to compensate for
lower compensation and to share ownership in the company.
Currently, if employees exercise these options, they are
required to pay taxes immediately but sometimes lack the
resources to do so. That means they may miss out on a
potential financial opportunity. This is a barrier for some
individuals to join a start-up, which means both the company
and individual lose, and so does our economy.
H.R. 5719 resolves this barrier by allowing employees seven
years or before the stock becomes tradeable on an established
market to pay the taxes when they exercise options. H.R. 5719
will help startup companies attract
[[Page H5826]]
and keep talented employees, and provide skilled individuals
another key incentive to join these promising businesses.
Thank you for your leadership on this important issue. SBE
Council looks forward to working with you to advance H.R.
5719 into law.
Sincerely,
Karen Kerrigan,
President & CEO.
____
September 19, 2016.
Hon. Erik Paulsen,
Cannon House Office Building,
Washington, DC.
Hon. Joseph Crowley,
Longworth House Office Building,
Washington, DC.
Dear Representative Paulsen and Representative Crowley: We
write you to express our support for H.R. 5719, the
Empowering Employees through Stock Ownership Act (EESO). This
bipartisan initiative, led by your efforts, will make it
possible for more employees to obtain an ownership stake in
the companies they help build and make it easier for startups
and private companies to attract the talent necessary to grow
the economy.
Part of the lure of startups and many private companies is
the ability for virtually all employees to own a piece of
their company. Unfortunately, it is difficult for many
private company employees to realize the value of their
equity (either through exercise or vesting) because of the
unique way tax rules apply to employee grants at private
companies. Under current law, employees are often required to
pay taxes on the value of their shares long before they are
able to sell and realize the economic value of those shares.
This is due to the fact that, unlike public company employees
who are able to sell shares in the public markets to offset
the tax consequences of exercised or vested equity grants,
private company employees do not have the ability to sell
their shares since no public market (or liquid secondary
market) exists. This means that many private company
employees cannot cover the cost of taxes at the time of
exercise/vesting through the sale of shares, but, instead,
must pay those costs out of pocket.
This situation is exacerbated for employees who have seen
their options or shares grow significantly in value since
their date of grant. In this case, taxes due on the
difference between grant price and fair market value on the
exercise or vesting date will be significant, meaning that
many employees will never be able to afford to exercise their
options and hold shares. As a result, many private company
employees allow their equity grants to expire and lose a
significant component of their compensation and potential
future growth through the ownership stake.
Your legislation would help solve this problem for many
employees by providing them with the ability to choose to
defer the payment of the income tax due upon exercise (or
vesting in the case of restricted stock units) until the
underlying stock is sold. This legislation is structured to
minimize the revenue impact to all stakeholders by simply
changing the timing of when income taxes are payable.
Again, we thank you for your leadership on this issue. We
look forward to working with you to help enact this common
sense modification to our country's tax laws so that
employees of innovative American companies are able to
acquire and retain more of their ownership interests in the
businesses they help build.
Sincerely,
Palantir Technologies; Avalara, Inc.; AppNexus Inc; Bloom
Energy; Sonos; Space Exploration Technologies Corp.; Return
Path; Stripe; NASDAQ Private Market; Acquia Inc.; Addepar;
Sailpoint Technologies Inc.; Casper; Meetup; Betterment;
Squarespace; Bromium; Engine; TechNet: The Voice of the
Innovation Economy; Kleiner Perkins Caulfield Byer.
Angel Capital Association; Techstars; Hackers/Founders;
Kansas City Startup Foundation; KC Tech Council; Y
Combinator; GitHub Inc.; 23andMe, Inc.; Gusto; TechNexus;
Accel; The Brandery; duolingo; Kabbage Inc.; Able Lending,
Inc.; Garmentory; hobbyDB; Foot Cardigan; Equityzen Inc.;
Foursquare.
2nd MD; Zaarly; Wealthfront Inc.; Hyperloop One; Medici.md;
Automattic; Decibly; Medium; ClipMine, Inc.; whiteLabelLabs;
Red & Blue Ventures; Global Accelerator Network; AIRMIKA,
INC.; Innovation State; Hacom LLC; Village Capital; Help
Scout; Filament; 60secondz; GeekGirlWeb, LLC.
Virtkick, Inc.; Speed & Function; 804RVA; Wefunder;
Neighborland; Goalbook; Bristlecone Holdings; Blue Startups;
Seed Philly; Lighthouse Labs; Hangar; Carao Ventures; Pick1;
Alpha Prime Ventures; eShares, Inc.; CrowdCheck Inc.; Lean
Team Tuning LLC.
Mr. PAULSEN. I urge all my colleagues in supporting this very
commonsense, bipartisan, and bicameral legislation to increase employee
ownership and accelerate American innovation.
Mr. Speaker, I reserve the balance of my time.
Mr. LEVIN. Mr. Speaker, I yield such time as he may consume to the
distinguished gentleman from New York (Mr. Crowley), someone who has
been a sponsor of this bill, and I ask unanimous consent that he be
allowed to control the balance of my time.
The SPEAKER pro tempore. Is there objection to the request of the
gentleman from Michigan?
There was no objection.
Mr. CROWLEY. Mr. Speaker, I thank the gentleman from Michigan for
yielding me the time.
I first want to recognize Congressman Erik Paulsen, my colead in
drafting the Empowering Employees through Stock Ownership Act that we
are debating today here on the floor. I appreciate his work in helping
to draft this and our offices working together to do that.
We have drafted up a bipartisan bill that, on the merits, should be
able to pass the House with an overwhelming majority--overwhelming
majority. But I must state my disappointment with the majority--and not
necessarily with the sponsor of this bill, but the leadership of the
majority--for refusing to allow a simple up-or-down vote on my
amendment, joined by the gentlewoman from California (Ms. Eshoo), to
offset the $1 billion cost of this bill over 10 years, so that we could
empower workers without saddling our children and our grandchildren and
our great-grandchildren with more debt.
Now that, in and of itself, is problematic in terms of hoisting
additional debt on our children, grandchildren, and great-
grandchildren, if it weren't for the fact that we also have crises
facing America, including the Zika virus.
I wonder how the women who today are pregnant and have the virus in
them feel about the fact that we are doing a tax bill today, unpaid
for, and yet are requiring an offset or a pay-for for money to go
towards Zika virus, or the fact that we have been here for over a year
and have not yet found the wherewithal to help the good people of
Flint, Michigan, unless we find a way to pay for that assistance and
that help; but somehow we are able to do this worthy bill on its face
without a pay-for.
With respect to the underlying bill, I think all of us are growing
increasingly concerned that far too many American workers have not been
sharing in the success of the companies that they helped make
successful. This bill aims to address that issue by promoting employee
ownership, very egalitarian, something I know many on my side of the
aisle are very excited about.
The Empowering Employees through Stock Ownership Act would allow
workers at privately held firms and startups to defer the income taxes
on their stock options up to 7 years or until a triggering event occurs
that allows the stock to be sold, whichever occurs sooner.
The proposed legislation is needed to address real-world situations
where employees of privately held firms, who are provided the
opportunity to become part owners of the company they helped build
through the granting of stock options and shares, cannot exercise that
stock without paying taxes on them as income, even though the options
cannot be readily sold. For example, there is no market for them to be
sold on.
Businesses often offer stock to employees to share the value of their
companies, recruit and maintain talented workers, and offer
compensation in addition to a salary that they receive. Stock options
also provide smaller startup companies the ability to compete with
larger, more established companies in attracting top talent.
{time} 1330
Currently, when an employee exercises their right to obtain stock in
their company, it is a taxable event and taxed in the same way as any
other form of compensation they receive.
In publicly traded companies, when employees exercise their stock
options or shares vest, the employee is able to turn around and sell a
small portion of that stock that is on the public market to pay the tax
they owe, while at the same time continuing to retain shares and
partial ownership of the company they work for.
Unfortunately, for employees of private companies and startups, there
is no market for employees to sell their shares to cover the tax
liability that they are exposed to in the same way that a publicly
traded company employee has those liabilities.
[[Page H5827]]
This tax burden prevents employees of privately held companies from
exercising their stock in the first place. That means they lose out on
a share of their income, they lose out on the ability to become an
owner in their company, and they lose out on part of their investment
in their employer's long-term goals.
This bill defers the taxes owed for employees of privately held
companies for 7 years or until there is what is known as a ``triggering
event,'' which occurs when a stock is sold. Examples of triggering
events are stock buybacks, acquisitions, or the company itself going
public.
Besides making it easier for lower-wage workers to become owners in
their company, this bill encourages companies to offer more stock to
more workers. We do this by stating that, to obtain these important
recruitment and retention benefits, a company must offer at least 80
percent of their full-time workforce the option to own stock. This 80
percent employee participation number excludes those who own 1 percent
or more of the company as well as the CEO and CFO and the four highest-
paid officers.
In small startups, excluding senior management and mandating an 80
percent employee coverage test ensures that more employees and those
further down the chain of command will be offered to share in the
success of the company. It is a good policy and, as I said before, it
enjoys bipartisan support.
Because the bill is a tax expenditure, the Joint Committee on
Taxation states that it would cost the Treasury and the American
taxpayers $1 billion over 10 years.
Unfortunately, as I stated earlier, an effort that was led by my
colleague from California (Ms. Eshoo) and myself to ensure this good
policy was enacted without further adding to the debt and the deficit
and by adding debt to future generations, unfortunately, was rejected
by the majority. It is unfortunate.
While the Republicans in the Congress refuse to fund a billion
dollars to help pregnant women in Florida, as I said before, fight off
the Zika virus or provide clean drinking water to the people of Flint,
Michigan, they are continuing their dangerous path of passing tax cuts
that will explode the deficit.
Indeed, just in 2016, Ways and Means Committee Republicans have
passed almost $55 billion in tax cuts out of the committee, all of
which, if enacted, would blow up the deficit.
Let's be clear: Who will pay for this tab? Will it be us?
No. We will pass the tab on to our children, our grandchildren, and
our great-grandchildren to pay for our excesses. It all boils down to
values, my friends.
So while I oppose this legislation today--a bill that I am a
cosponsor of--I am heartened by the fact that the Senate Finance
Committee passed a companion bill to this bill just yesterday on a
bipartisan basis. I don't know how they did it, but somehow they found
an offset, Democrats and Republicans working together, which I
attempted to do with my colleagues on the Republican side. They found
an offset. It is remarkable the Republicans in the Senate thought it
was important enough to pay for this and not add further debt to our
future generations.
I look forward to supporting this bill when it comes back to the
House, fully paid for, when we take up the Senate bill. We know that is
what is going to happen. I look forward to working with the Senate to
enact this good policy into law, but without saddling our children, our
grandchildren, and our great-grandchildren with the cost of this
benefit.
Mr. Speaker, I reserve the balance of my time.
Mr. PAULSEN. Mr. Speaker, I yield 1 minute to the gentleman from
California (Mr. McCarthy), the majority leader, who has moved forward
and focused attention on a number of different innovation initiatives.
These initiatives have come from listening to entrepreneurs.
Mr. McCARTHY. I thank the gentleman for yielding and, most
importantly, for his work. It is not just the work today, but it is the
work every day for almost all Americans.
When we talk about medical devices, they are so important to keep
people alive. Well, there is one person in this House who led the
charge to make sure that tax was repealed so that more medical devices
and more jobs could be created, and that is the author of this bill.
This bill is giving more Americans the opportunity for ownership. Isn't
that the American Dream?
It is interesting, Mr. Speaker. I hear a lot of words on this floor.
I heard just recently words about values. You know what is interesting?
The record doesn't lie. I hear on this floor about values and I hear on
this floor about Zika.
Do you know what?
That is one of the greatest threats to the citizens of America. That
is why this House did not delay in acting. We passed not once, but
twice, funding for $1.7 billion. But, Mr. Speaker, the sad part was
that one side of the aisle got into another fight and tried to punish
Americans, so they all voted ``no.'' And then it goes back, but it
passes--thank God--because the majority took it up and sent it to the
Senate.
Do you know what happened over in the Senate?
The minority party has voted not once, not twice, but three times,
not against the bill, but even allowing the bill to be brought up.
While those Americans sit back and are very fearful about Zika, it
was one party denying the bill to even come up in the Senate to get to
the President.
So, yes, Mr. Speaker, when we talk about values, values matter. That
is what we are talking about today. The House is considering two
important pieces of innovation initiatives. The values. The values of
creating jobs. The first is by Representative Will Hurd to improve
government IT systems. The second is by Representative Erik Paulsen to
help startups attract and retain the best employees they can.
These bills go right to the heart of the innovation initiative's two
goals: to bring innovation into government and enable innovation in the
private sector.
Now, I am not breaking any news here, but too many of our technology
systems in government are increasingly outdated. So here are the facts.
Last year alone, the Federal Government spent 80 percent--get this
right--80 percent of the $80 billion directed to IT just maintaining
old legacy systems. That is 80 percent of $80 billion.
Representative Will Hurd's bipartisan legislation will help bring
government technology systems into the modern age, allowing the
government to do its job more effectively, save taxpayers money, and
keep public information secure. However, even as we use innovation to
improve the way government functions, we can't ignore the importance of
innovation in the private sector. You see, an innovation economy is a
fundamental part of the American success story.
Today we have these businesses we call gazelles. Gazelles are small
startups that grow 20 percent every year or double every 2 years.
Gazelles make up 4 percent of all new startups. But do you know what?
They make up 70 percent of all new jobs.
We have not reached America's full potential. Not even close. We need
to update our laws to enable further innovation so that those with good
ideas can create even more opportunity for Americans.
The idea of innovation producing growth is why we are voting today on
Representative Erik Paulsen's Empowering Employees through Stock
Ownership Act. The truth is, when the startups are funded and founded,
they can't offer potential employees the same salaries and benefits of
those companies that have already become household names, but they can
offer partial ownership. That is the American Dream.
Offering stock options not only allows startups to attract the
workers they need, it also gives employees a greater stake in the
success of the company. But, unfortunately, the current Tax Code
punishes many employees who own stock, taxing them before they even
have the opportunity to sell the stock to pay the bill.
Representative Paulsen's bill allows workers to actually own a piece
of the company that they work for. It defers the tax they owe on the
stocks for a time so that they have the opportunity to work for a young
company that may not have the most resources, but does have a vision of
a future that they can believe in.
[[Page H5828]]
By giving companies the chance to hire and retain the best employees,
do you know what happens?
We will have more innovation, more growth, and more success for the
American people.
As you grow in America and get older and have children, you no longer
worry about what you will do. You worry about what opportunities your
children will have.
Don't you dream that one day maybe your children can even own a piece
of their company? But don't you hate to wake up and have the government
punish you so that you can't be that owner? Why wouldn't you want
government to work for you? Why wouldn't you want government to
enhance? Why wouldn't you want innovation?
You want a government that is more effective, more efficient, and
more accountable. You want a private sector that is able to spur growth
and create more jobs. And you want a country that can protect you from
the Zika virus.
Well, you know what? This Congress has acted on all of those and will
act on the rest of them today. I hope that it is a bipartisan vote to
represent all Americans.
Mr. CROWLEY. Mr. Speaker, I yield such time as she may consume to the
gentlewoman from California (Ms. Eshoo), my good friend and colleague.
Ms. ESHOO. I thank the gentleman from New York, my good friend, for
yielding.
Mr. Speaker, I rise in reluctant opposition not to the legislation--
because I am a cosponsor of it and I think it is a very good bill and I
think it is an important bill--Empowering Employees through Stock
Ownership Act.
The underlying policy of this bill--it is bipartisan, as has been
stated--is to allow employees of privately owned companies to be able
to defer taxes owed on exercised stock options for up to 7 years.
I think that there is unanimity on this. I know something about stock
options. I have represented Silicon Valley for 24 years. I led the
House in a battle many, many years ago on stock options. And I won
that, by the way. So I know how stock options work, and I think that it
is very important for nonpublic entities--the startups, first of all--
to be able to attract people. When they attract these talented
employees, the option of stock options with a deferred tax status would
be very, very important. It is a magnet.
We always want new businesses to be born. We want them to grow. We
want them to go public. We want them to employ more people. That is the
way our economy works. I think that it is a very, very important policy
to support. But I also think that--as we recognize the responsibility
to take a step to help to expand our economy, I also think it is
responsible to think about how we conduct our finances. I wish I had a
dime or a nickel for every time someone has come to the floor,
especially from the other side, pounding their chest about the national
debt.
So here we have a combination of good policy and irresponsible fiscal
policy.
{time} 1345
Now, Mr. Crowley and I went to--I couldn't make it, but it was our
amendment at the Rules Committee to pay for this. The Joint Committee
on Taxation says it is going to cost over $1 billion over 10 years.
Now, when first responders who got sick after the dollars were
expended and we wanted them covered because they were, essentially,
dying, they were over at the Energy and Commerce Committee, the
majority said we are not doing this bill unless it is paid for. That
was a national emergency, but you couldn't find the time or the way to
take care of that.
When are we going to stop charging things to the national debt? Why
do you think it is all right to do it this way? I really wonder if you
want bipartisan support.
The American people want bipartisanship. They want it done
responsibly. But they also want us--don't your constituents ask you how
you are going to bring the debt down? Come on. This is like political
cross-dressing here.
Why wouldn't the Rules Committee say: You know what? These Members
are right, and they are offering a very sensible way to pay for this
bill.
We gave you the pathway for it. We give you the answer for it. We say
we will support the policy. We want it paid for. Why do you turn that
down?
So I think it is sad, I really do. And all of this happy talk that
comes to the floor about innovation, and we know and we are doing and
whatever, I have represented it for 24 years, and I think one of the
values of my constituents is fiscal responsibility as well as good
policy, and that is what we offered.
So I urge my colleagues to examine the two prongs, not just the one.
This could have been bipartisan and you could have passed it on a voice
vote, for heaven's sake, if you had it paid for. And that is why I am
on the floor to object to the way this is done, not to the policy, but
that it isn't paid for.
The SPEAKER pro tempore. Members are reminded to please address their
remarks to the Chair.
Mr. PAULSEN. Mr. Speaker, I yield 4 minutes to the gentleman from
California (Mr. Rohrabacher), who has been a passionate advocate for
entrepreneurship.
Mr. ROHRABACHER. Mr. Speaker, entrepreneurship and employee ownership
as well.
I rise in support of H.R. 5719, the Empowering Employees through
Stock Ownership Act, a bill that will allow certain employee recipients
of employer stock to defer paying income tax on the stock until they
are able to liquidate a portion of the stock to pay those taxes or once
7 years have passed, whichever comes first.
This is a modest but meaningful step in the right direction. It is a
modest and meaningful step toward transforming our economy into an
ownership society where employees are empowered with a direct and
enduring stake in the well-being of their company.
I applaud Representative Paulsen for offering this legislation and
Chairman Brady for shepherding it through his committee and onto the
floor.
As you may know, Mr. Speaker, I have a bill that was crafted in the
same spirit as this bill that we are considering today. It is a bill
that, in my view, should be this body's next step, after this step
forward, toward creating an ownership society.
My bill, the Expanding Employee Ownership Act of 2016, which is H.R.
4577, would permanently exempt from income tax liability any stock that
was received by employees as part of a broad-based distribution to all
employees, so long as the employees held on to the stock for 5 years.
If the employee holds the stock for 10 years or more, after that, a
mechanism is triggered that allows the employees to sell their stock
free of capital gains tax. So by giving the employee a pass on income
tax for their stock or capital gains tax for their stock, we will
greatly expand the number of working people in our country who own part
of the company and maybe own a majority of the companies owned by
employees throughout this country.
As we know, employee ownership has many positive attributes, and this
bill takes us a step toward that. Studies show that employees who own a
share in their company are more productive and prudent. Studies further
show that employee-owned companies are generally more profitable and
have a lower turnout rate. You have a solidarity between management and
labor when the people working for a company own part of the company
that they work for. It is more of a partnership.
Free enterprise doesn't just mean profit motive for the capitalists.
It means profit motive--not only just profit motive, but it means
freedom for everyone to participate in a system where ownership is so
important to standard of living.
What has been really very disturbing in our society for these last
30, 40 years is we see the income disparity that exists in our society.
Much of it is because working class people have been kept out of
capital ownership, and that small, small number of Americans who own
the capital have now vast amounts of wealth.
Well, I am not against people being wealthy, but I think that we
should make sure our system is designed as our Founding Fathers meant
it to be, where you have a maximum amount of people enjoying the
freedom and liberty and rights of all the rest of the citizens.
This bill today and my proposal would just take us down a path in
[[Page H5829]]
which employees and ordinary working people would not only have a stake
in their own company, but probably would have a stake in owning
capital, which would bring down this disparity between working people
and people of wealth. So today I ask my colleagues to join me in
supporting this legislation.
Mr. CROWLEY. Mr. Speaker, I yield myself such time as I may consume.
Mr. Speaker, again I want to reiterate, I do appreciate working with
Mr. Paulsen on this issue, and there is really no opposition from me in
terms of the policy that we are attempting to put forward here on the
floor today. We all agree on the merits of the bill. It is a good bill.
I think you have heard that from the ranking member of the Committee on
Ways and Means, and you also heard it from the gentlewoman on the
Energy and Commerce Committee, Ms. Eshoo.
Obviously, Mr. Paulsen and I both agree that this bill has merit. It
is a good bill. But I don't believe this will become law today. This
bill, the one we are actually debating and we will have a vote on
today, in and of itself, will not be enacted in its form today.
We need to enact good policies but not punish our next generation
with new debt. That is something I have been reiterating over and over
again. So I will vote ``no'' today on this bill, even though I am the
cosponsor of the bill.
That is not the only reason why I will not support the underlying
bill today, not just because of placing the debt and the burden of that
debt on my children, our children, your grandchildren and great-
grandchildren, but because of the fact that there are a number of
crises going on in our country today that the Congress, the Republican
Congress, simply can't get their hands around, and some are questioning
whether they want to get their hands around them at all.
Here is a shocking statistic. Back in June of this year, it was
reported by the CDC that 234 women in the 48 States, the continental
United States, 234 women had contracted the Zika virus--pregnant women.
I am sorry, pregnant women, 234 pregnant women.
While we were here in Congress in the month of June and July and then
we broke for 7 weeks in August, and there was no work here done on the
floor to address the issue of the Zika virus, as of the middle of
September, of this month, in the U.S., 48 continental U.S. States, 749
pregnant women now have the Zika virus. That is three times as many
people in a 3-month period.
Now, I don't suggest that possibly it would be, in 3 months from now,
three times higher than it is today. In fact, I would argue it is
probably a lot higher if we continue down this road of not addressing
this issue at all.
But I would have to be one of the 515 women who contracted the Zika
virus at the end of June and--why were we here in Congress and did not
enact Zika legislation all through July, all through the month of
August into September? If I am one of those 515 women who is now
pregnant, I have got to wonder: What is my government doing? They may
have gotten it anyway, but at least the government may have been making
an attempt to prevent them from contracting the virus.
If I am one of those women, I am saying: The government didn't do
anything. The Republican Congress, who controls the House of
Representatives and controls the Senate, didn't do anything and,
instead, forced the President to move money around the NIH, taking from
cancer research, taking from the Ebola issue, taking those resources to
try to stop the water from coming out of the dam, putting a finger in
the hole. And that is a euphemism.
I mean, at the end of the day, if you are one of the 515 women, there
is no answer for it. There is no agreeable answer to them. They are
living a nightmare.
And let's think about the thousands and thousands and thousands and
thousands of children under the age of 9 in Flint, Michigan, who have
been exposed to horrific levels of lead poisoning in their drinking
water, unbeknownst to them and their families.
Imagine you are the mother of that child or the father of that child,
and you were giving them that drinking water, the guilt you must feel
because you didn't know that there was lead in that water. You didn't
know that your local government, your State government had let you
down, and now your Federal Government is letting you down because we
are not doing anything for them.
When the call is to do something and there are negotiations going on,
we are not going to have to pay for the tax cuts; but folks in Michigan
and Flint and folks in Florida--and now Texas has to be concerned, the
southern tier of the United States--we are going to have to find an
offset to address your emergent issues.
A tax cut for a bill that I think is worthy, we don't need a tax cut
for it. We don't need a pay-for for the tax cut. But for an emergent
crisis like Zika, like what happened in Flint, we have to find an
offset.
How would you feel? How would you feel, America, if that happened to
you? How would you feel about the Republican leadership of the House of
Representatives and the Senate if that happened to you?
I know how I would feel. I know how I feel. I feel disappointed. I
feel let down. I feel like the Republican leadership and caucus in the
House and the Senate doesn't have your back, doesn't have my back. That
is how I feel about it. That is how Americans feel.
Mr. Speaker, I yield back the balance of my time.
Mr. PAULSEN. Mr. Speaker, I yield myself such time as I may consume.
As we close, let me just start by thanking my colleagues on both
sides of the aisle that have spoken in favor of the merits of the bill
and in support for the bill. We all know that startups fuel innovation.
{time} 1400
It is the entrepreneurial spirit and American ingenuity and know-how
that has produced new technologies and has produced new breakthroughs
and new inventions to improve health care, to improve society, and to
create more jobs and economic growth. It is part of our DNA.
Startups don't have the ability to offer potential employees and new
talent the same benefits or same salaries that can be more valuable in
the long run than larger institutions can offer to certain employees.
So, instead, these startups have to go forward and offer their
employees something that could be more valuable--a chance to be a part
of the company, a chance to own a piece of the rock.
A lot of startups offer stock options to recruit top talent. It is an
incentive for an employee to work hard for the company they believe in
or in the idea that they believe in. But more and more often, employees
at these startups are missing out. They are missing out on the
opportunity because they are not exercising their stock options to have
the equity in the company that they believe in. They are not exercising
them because if they do, they have to immediately pay the taxes on the
income associated with the stock even though they may not be able to
afford the cash payment to do so.
A big number of these startups, Mr. Speaker, are privately held with
no market for the employees to sell a portion of their stock to pay
their taxes. The IRS demands the tax payment immediately, and so those
employees let their options expire. They never have the chance to get
the investment at a job they believe in and a job they enjoy.
But, today, Mr. Speaker, we are fixing that. We have a solution. We
are giving these startup employees a reasonable time period to pay the
tax, allowing them to wait until their stock becomes tradeable on a
public market so they can sell it to pay the bill.
Helping the innovation economy is a key and important way to promote
new products, to promote new services, and to promote new ideas from
the dreamers, the inventors, and entrepreneurs we have in America.
Letting those innovators attract the brightest and best talent is going
to keep America out front, always innovating, always creating, and
always inspiring American leadership.
Mr. Speaker, I yield back the balance of my time.
The SPEAKER pro tempore (Mr. Graves of Louisiana). All time for
debate has expired.
Pursuant to House Resolution 875, the previous question is ordered on
the bill, as amended.
[[Page H5830]]
The question is on the engrossment and third reading of the bill.
The bill was ordered to be engrossed and read a third time, and was
read the third time.
The SPEAKER pro tempore. The question is on the passage of the bill.
The question was taken; and the Speaker pro tempore announced that
the ayes appeared to have it.
Mr. CROWLEY. Mr. Speaker, on that I demand the yeas and nays.
The yeas and nays were ordered.
The SPEAKER pro tempore. Pursuant to clause 8 of rule XX, further
proceedings on this question will be postponed.
____________________