Finance Committee Bill Prevents IRS From Imposing Payroll Taxes on ISO and ESPP Exercises

The Pension Reform Act passed by the Senate Finance Committee concurs with the House-passed pension bill to prevent the IRS from imposing payroll tax withholding on ESPP and ISO spreads on exercise. The IRS has indicated that it might impose these taxes in 2005 or later. While it seems unlikely that the bills will become law this year, it does indicate a strong, bi-partisan opposition to the taxes and the likelihood that Congress will act to prevent their imposition if the IRS proceeds.