Bipartisan Federal Legislation Would Encourage Broad-Based Stock Options in Private Companies

Identical bills introduced in the House and Senate on July 12 would make stock options more attractive to employees in privately held companies by increasing the flexibility of the time they must pay taxes on those options. Employees generally pay taxes on options for the year in which they exercised those options, but this bill would allow them to defer those taxes for up to seven years. To qualify for the extension, the employer would need to offer options to at least 80% of its employees and would agree to provide information about changes in stock price.

The sponsors of the Senate bill are Sens. Mark Warner (D-Va.) and Dean Heller (R-Nev.), and the sponsor of the parallel House bill is Rep. Erik Paulsen (R-Minn.). Speaking in support of the bill, Sen. Warner said, "Extending employee stock programs to a broader universe of workers will strengthen business growth and create new economic opportunities, especially for rank-and-file workers."