108th CONGRESS
1st Session
H. R. 286
To amend the Internal Revenue Code of 1986 to clarify the treatment
of incentive stock options and employee stock purchase plans.
IN THE HOUSE OF REPRESENTATIVES
January 8, 2003
Mr. HOUGHTON (for himself, Mr. BARTLETT of Maryland, Mr. COX, Mr. CRANE,
Mr. TOM DAVIS of Virginia, Mr. DOOLEY of California, Ms. DUNN, Mr. ENGLISH,
Mr. FILNER, Mr. FOLEY, Mr. GILLMOR, Mr. HAYWORTH, Mr. HERGER, Mr. HONDA, Mrs.
JOHNSON of Connecticut, Mr. SAM JOHNSON of Texas, Ms. LOFGREN, Ms. PRYCE of
Ohio, Mr. QUINN, Mr. RAMSTAD, and Mr. SESSIONS) introduced the following bill;
which was referred to the Committee on Ways and Means
A BILL
To amend the Internal Revenue Code of 1986 to clarify the treatment
of incentive stock options and employee stock purchase plans.
Be it enacted by the Senate and House of Representatives of the United
States of America in Congress assembled,
SECTION 1. EXCLUSION OF INCENTIVE STOCK OPTIONS AND EMPLOYEE STOCK PURCHASE
PLAN STOCK OPTIONS FROM WAGES.
(a) EXCLUSION FROM EMPLOYMENT TAXES-
(1) SOCIAL SECURITY TAXES-
(A) Section 3121(a) of the Internal Revenue Code of 1986 (relating to
definition of wages) is amended by striking `or' at the end of paragraph
(20), by striking the period at the end of paragraph (21) and inserting
`; or', and by inserting after paragraph (21) the following new paragraph:
`(22) remuneration on account of--
`(A) a transfer of a share of stock to any individual pursuant to an exercise
of an incentive stock option (as defined in section 422(b)) or under an
employee stock purchase plan (as defined in section 423(b)), or
`(B) any disposition by the individual of such stock.'.
(B) Section 209(a) of the Social Security Act is amended by striking `or'
at the end of paragraph (17), by striking the period at the end of paragraph
(18) and inserting `; or', and by inserting after paragraph (18) the following
new paragraph:
`(19) Remuneration on account of--
`(A) a transfer of a share of stock to any individual pursuant to an exercise
of an incentive stock option (as defined in section 422(b) of the Internal
Revenue Code of 1986) or under an employee stock purchase plan (as defined
in section 423(b) of such Code), or
`(B) any disposition by the individual of such stock.'.
(2) RAILROAD RETIREMENT TAXES- Subsection (e) of section 3231 of such Code
is amended by adding at the end the following new paragraph:
`(11) QUALIFIED STOCK OPTIONS- The term `compensation' shall not include
any remuneration on account of--
`(A) a transfer of a share of stock to any individual pursuant to an exercise
of an incentive stock option (as defined in section 422(b)) or under an
employee stock purchase plan (as defined in section 423(b)), or
`(B) any disposition by the individual of such stock.'.
(3) UNEMPLOYMENT TAXES- Section 3306(b) of such Code (relating to definition
of wages) is amended by striking `or' at the end of paragraph (16), by striking
the period at the end of paragraph (17) and inserting `; or', and by inserting
after paragraph (17) the following new paragraph:
`(18) remuneration on account of--
`(A) a transfer of a share of stock to any individual pursuant to an exercise
of an incentive stock option (as defined in section 422(b)) or under an
employee stock purchase plan (as defined in section 423(b)), or
`(B) any disposition by the individual of such stock.'.
(b) WAGE WITHHOLDING NOT REQUIRED ON DISQUALIFYING DISPOSITIONS- Section 421(b)
of such Code (relating to effect of disqualifying dispositions) is amended
by adding at the end the following new sentence: `No amount shall be required
to be deducted and withheld under chapter 24 with respect to any increase
in income attributable to a disposition described in the preceding sentence.'.
(c) WAGE WITHHOLDING NOT REQUIRED ON COMPENSATION WHERE OPTION PRICE IS BETWEEN
85 PERCENT AND 100 PERCENT OF VALUE OF STOCK- Section 423(c) of such Code
(relating to special rule where option price is between 85 percent and 100
percent of value of stock) is amended by adding at the end the following new
sentence: `No amount shall be required to be deducted and withheld under chapter
24 with respect to any amount treated as compensation under this subsection.'.
(d) EFFECTIVE DATE- The amendments made by this section shall apply to stock
acquired pursuant to options exercised after the date of the enactment of
this Act.
END
