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Title IX — Fair treatment of options

S. 277 · 113th Congress · Feb 11, 2013 · Lineage

IX Fair treatment of options

Sec. 901 Consistent treatment of stock options by corporations

(a)
Consistent treatment for wage deduction—
(1)
In general— Section 83(h) is amended—
(A)
by striking “In the case of” and inserting:

“(1) In general—In the case of”

(B)
by adding at the end the following new paragraph:

“(2) Stock options—In the case of property transferred to a person in connection with a stock option, any deduction related to such stock option shall be allowed only under section 162(q) and paragraph (1) shall not apply.”

(2)
Treatment of compensation paid with stock options— Section 162 is amended by redesignating subsection (q) as subsection (r) and by inserting after subsection (p) the following new subsection:

“(q) Treatment of compensation paid with stock options

“(1) In general—In the case of compensation for personal services that is paid with stock options, the deduction under subsection (a)(1) shall not exceed the amount the taxpayer has treated as compensation cost with respect to such stock options for the purpose of ascertaining income, profit, or loss in a report or statement to shareholders, partners, or other proprietors (or to beneficiaries), and shall be taken into account in the same period that such compensation cost is recognized for such purpose.

“(2) Special rules for controlled groups—The Secretary may prescribe rules for the application of paragraph (1) in cases where the stock option is granted by—

“(A) a parent or subsidiary corporation (within the meaning of section 424) of the taxpayer, or

“(B) another corporation.”

(b)
Consistent treatment for research tax credit— Section 41(b)(2)(D) is amended by inserting at the end the following new clause:

“(iv) Special rule for stock options—The amount which may be treated as wages for any taxable year in connection with the issuance of a stock option shall not exceed the amount allowed for such taxable year as a compensation deduction under section 162(q) with respect to such stock option.”

(c)
Application of amendments— The amendments made by this section shall apply to stock options exercised after the date of the enactment of this Act, except that—
(1)
such amendments shall not apply to stock options that were granted before such date and that vested in taxable periods beginning on or before June 15, 2005,
(2)
for stock options that were granted before such date of enactment and vested during taxable periods beginning after June 15, 2005, and ending before such date of enactment, a deduction under section 162(q) of the Internal Revenue Code of 1986 (as added by subsection (a)(2)) shall be allowed in the first taxable period of the taxpayer that ends after such date of enactment,
(3)
for public entities reporting as small business issuers and for non-public entities required to file public reports of financial condition, paragraphs (1) and (2) shall be applied by substituting “December 15, 2005” for “June 15, 2005”, and
(4)
no deduction shall be allowed under section 83(h) or section 162(q) of such Code with respect to any stock option the vesting date of which is changed to accelerate the time at which the option may be exercised in order to avoid the applicability of such amendments.

Sec. 902 Application of executive pay deduction limit

(a)
In general— Subparagraph (D) of section 162(m)(4) is amended to read as follows:

“(D) Stock option compensation—The term applicable employee remuneration shall include any compensation deducted under subsection (q), and such compensation shall not qualify as performance-based compensation under subparagraph (C).”

(b)
Effective date— The amendment made by this section shall apply to stock options exercised or granted after the date of the enactment of this Act.