,,ib  ,union ,cal5d> ,no4 #eha  #aad?   
,,congress  #b;d ,session  ,h4 ,r4 #egai
  ,report ,no4 #aad-gdh  ,,9 ,,! ,,h\se 
,,( ,,repres5tatives  ,july #aa1 #bjaf  
,mr4 ,pauls5 introduc$ ! foll[+ bill2   
:i* 0 ref]r$ to ! ,committee on ,ways & 
,means  ,septemb] #af1 #bjaf ,additional
 sponsors3 ,mr4 ,cr[ley1 ,ms4 ,e%oo1 &  
,mr4 ,hultgr5  ,septemb] #af1 #bjaf     
,report$ ) an am5dm5t1 committ$ to !    
,committee ( ! ,:ole ,h\se on ! ,/ate ( 
! ,union1 & ord]$ to be pr9t$ ,/rike out
 all aft] ! enact+ clause & ins]t ! "p  
pr9t$ 9 italic ,= text ( introduc$ bill1
 see copy ( bill z introduc$ on ,july   
#aa1 #bjaf  ,a ,,bill  ,to am5d !       
,int]nal ,rev5ue ,code ( #aihf to modify
 ! tax treatm5t ( c]ta9 equity grants4  
#a4 ,%ort title ,?is ,act may be cit$ z 
! ,emp[]+ ,employees ?r\gh ,/ock        
,own]%ip ,act4  #b4 ,treatm5t ( qualifi$
 equity grants  7a7 ,9 g5]al  7#a7      
,election to def] income ,section #hc ( 
! ,int]nal ,rev5ue ,code ( #aihf is     
am5d$ by add+ at ! end ! foll[+ new     

subsection3  7i7 ,qualifi$ equity grants
  7#a7 ,9 g5]al ,= purposes ( ?is       
subtitle1 if qualifi$ /ock is transf]r$ 
to a qualifi$ employee :o makes an      
election ) respect to su* /ock "u ?is   
subsection-- 7,a7 except z provid$ 9    
subp>agraph 7,b71 no am\nt %all be      
includ$ 9 income "u subsection 7a7 = !  
fir/ taxable ye> 9 :i* ! rights ( !     
employee 9 su* /ock are transf]able or  
are n subject to a sub/antial risk (    
=feiture1 :i*ev] is applicable1 &  7,b7 
an am\nt equal to ! am\nt :i* w\ld be   
includ$ 9 income ( ! employee "u        
subsection 7a7 7det]m9$ )\t reg>d to ?is
 subsection7 %all be includ$ 9 income = 
! taxable ye> ( ! employee :i* includes 
! e>lie/ (-- 7i7 ! fir/ date su*        
qualifi$ /ock becomes transf]able       
7includ+ transf]able to ! employ]71     
7ii7 ! date ! employee fir/ becomes an  
exclud$ employee1  7iii7 ! fir/ date on 
:i* any /ock ( ! corporation :i* issu$ !
 qualifi$ /ock becomes readily tradable 
on an e/abli%$ securities m>ket 7z      

det]m9$ by ! ,secret>y1 b n includ+ any 
m>ket unless su* m>ket is recogniz$ z an
 e/abli%$ securities m>ket by !         
,secret>y = purposes ( a provision ( ?is
 title o!r ?an ?is subsection71  7iv7 ! 
date t is #g ye>s aft] ! fir/ date !    
rights ( ! employee 9 su* /ock are      
transf]able or are n subject to a       
sub/antial risk ( =feiture1 :i*ev]      
occurs e>li]1 or  7v7 ! date on :i* !   
employee revokes 7at su* "t & 9 su*     
mann] z ! ,secret>y may provide7 !      
election "u ?is subsection ) respect to 
su* /ock4  7#b7 ,qualifi$ /ock  7,a7 ,9 
g5]al ,= purposes ( ?is subsection1 !   
t]m qualifi$ /ock means1 ) respect to   
any qualifi$ employee1 any /ock 9 a     
corporation :i* is ! employ] ( su*      
employee1 if-- 7i7 su* /ock is receiv$--
  7,i7 9 connection ) ! ex]cise ( an    
option1 or  7,,ii7 9 settlem5t ( a      
re/rict$ /ock unit1 &  7ii7 su* option  
or re/rict$ /ock unit 0 provid$ by !    
corporation-- 7,i7 9 connection ) !     
p]=mance ( s]vices z an employee1 &     

7,,ii7 dur+ a cal5d> ye> 9 :i* su*      
corporation 0 an eligible corporation4  
7,b7 ,limitation ,! t]m qualifi$ /ock   
%all n include any /ock if ! employee   
may sell su* /ock to1 or o!rwise receive
 ca% 9 lieu ( /ock f1 ! corporation at !
 "t t ! rights ( ! employee 9 su* /ock  
fir/ become transf]able or n subject to 
a sub/antial risk ( =feiture4  7,c7     
,eligible corporation ,= purposes (     
subp>agraph 7,a77ii77,,ii7-- 7i7 ,9     
g5]al ,! t]m eligible corporation means1
 ) respect to any cal5d> ye>1 any       
corporation if--  7,i7 no /ock ( su*    
corporation 7or any pr$ecessor ( su*    
corporation7 is readily tradable on an  
e/abli%$ securities m>ket 7z det]m9$ "u 
p>agraph 7#a77;,b77iii77 dur+ any prec$+
 cal5d> ye>1 &  7,,ii7 su* corporation  
has a writt5 plan "u :i*1 9 su* cal5d>  
ye>1 n less ?an #hj p]c5t ( all         
employees :o provide s]vices to su*     
corporation 9 ! ,unit$ ,/ates 7or any   
possession ( ! ,unit$ ,/ates7 are grant$
 /ock options1 or re/rict$ /ock units1 )

 ! same rights & privileges to receive  
qualifi$ /ock4  7ii7 ,same rights &     
privileges ,= purposes ( clause         
7i77,,ii7-- 7,i7 except z provid$ 9     
subclauses 7,,ii7 & 7,,iii71 !          
det]m9ation ( rights & privileges )     
respect to /ock %all be det]m9$ 9 a     
simil> mann] z provid$ "u section       
#dbc7;b77#e71  7,,ii7 employees %all n  
fail to be treat$ z hav+ ! same rights &
 privileges to receive qualifi$ /ock    
solely because ! numb] ( %>es available 
to all employees is n equal 9 am\nt1 s  
long z ! numb] ( %>es available to ea*  
employee is m ?an a de m9imis am\nt1 &  
7,,iii7 rights & privileges ) respect to
 ! ex]cise ( an option %all n be treat$ 
z ! same z rights & privileges ) respect
 to ! settlem5t ( a re/rict$ /ock unit4 
7iii7 ,employee ,= purposes ( clause    
7i77,,ii71 ! t]m employee %all n include
 any employee describ$ 9 section        
#dihj;,e7d77#d7 or any exclud$ employee4
  7iv7 ,special rule = cal5d> ye>s be=e 
#bjag ,9 ! case ( any cal5d> ye> beg9n+ 

be=e ,janu>y #a1 #bjag1 clause 7i77,,ii7
 %all be appli$ )\t reg>d to :e!r !     
rights & privileges ) respect to !      
qualifi$ /ock are ! same4  7#c7         
,qualifi$ employee2 exclud$ employee ,= 
purposes ( ?is subsection-- 7,a7 ,9     
g5]al ,! t]m qualifi$ employee means any
 individual :o--  7i7 is n an exclud$   
employee1 &  7ii7 agrees 9 ! election   
made "u ?is subsection to meet su*      
requirem5ts z det]m9$ by ! ,secret>y to 
be necess>y to ensure t ! )hold+        
requirem5ts ( ! corporation "u *apt] #bd
 ) respect to ! qualifi$ /ock are met4  
7,b7 ,exclud$ employee ,! t]m exclud$   
employee means1 ) respect to any        
corporation1 any individual-- 7i7 :o 0 a
 #a-p]c5t own] 7)9 ! mean+ ( section    
#daf7;i77#a77;,b77ii77 at any "t dur+ ! 
#aj prec$+ cal5d> ye>s1  7ii7 :o is or  
has be5 at any prior "t-- 7,i7 ! *ief   
executive (fic] ( su* corporation or an 
individual act+ 9 su* a capacity1 or    
7,,ii7 ! *ief f9ancial (fic] ( su*      
corporation or an individual act+ 9 su* 

a capacity1  7iii7 :o be>s a relation%ip
 describ$ 9 section #cah7;a77#a7 to any 
individual describ$ 9 subclause 7,i7 or 
7,,ii7 ( clause 7ii71 or  7iv7 :o has   
be5 = any ( ! #aj prec$+ taxable ye>s "o
 ( ! #d highe/ comp5sat$ (fic]s ( su*   
corporation det]m9$ ) respect to ea* su*
 taxable ye> on ! basis ( ! %>ehold]    
disclosure rules = comp5sation "u !     
,securities ,ex*ange ,act ( #aicd 7z if 
su* rules appli$ to su* corporation74   
7#d7 ,election  7,a7 ,"t = mak+ election
 ,an election ) respect to qualifi$ /ock
 %all be made "u ?is subsection no lat] 
?an #cj days aft] ! fir/ "t ! rights ( !
 employee 9 su* /ock are transf]able or 
are n subject to a sub/antial risk (    
=feiture1 :i*ev] occurs e>li]1 & %all be
 made 9 a mann] simil> to ! mann] 9 :i* 
an election is made "u subsection 7b74  
7,b7 ,limitations ,no election may be   
made "u ?is section ) respect to any    
qualifi$ /ock if-- 7i7 ! qualifi$       
employee has made an election "u        
subsection 7b7 ) respect to su* qualifi$

 /ock1  7ii7 any /ock ( ! corporation   
:i* issu$ ! qualifi$ /ock is readily    
tradable on an e/abli%$ securities m>ket
 7z det]m9$ "u p>agraph 7#a77;,b77iii77 
at any "t be=e ! election is made1 or   
7iii7 su* corporation pur*as$ any ( its 
out/&+ /ock 9 ! cal5d> ye> prec$+ !     
cal5d> ye> :i* includes ! fir/ "t !     
rights ( ! employee 9 su* /ock are      
transf]able or are n subject to a       
sub/antial risk ( =feiture1 unless--    
7,i7 n less ?an #be p]c5t ( ! total     
doll> am\nt ( ! /ock s pur*as$ is       
def]ral /ock1 &  7,,ii7 ! det]m9ation ( 
:i* individuals f :om def]ral /ock is   
pur*as$ is made on a reasonable basis4  
7,c7 ,def9itions & special rules relat$ 
to limitation on /ock r$emptions  7i7   
,def]ral /ock ,= purposes ( ?is         
p>agraph1 ! t]m def]ral /ock means /ock 
) respect to :i* an election is 9 effect
 "u ?is subsection  7ii7 ,def]ral /ock )
 respect to any individual n tak5 into  
acc\nt if individual holds def]ral /ock 
) long] def]ral p]iod ,/ock pur*as$ by a

 corporation f any individual %all n be 
treat$ z def]ral /ock = purposes (      
clause 7iii7 if su* individual          
7imm$iately aft] su* pur*ase7 holds any 
def]ral /ock ) respect to :i* an        
election has be5 9 effect "u ?is        
subsection = a long] p]iod ?an !        
election ) respect to ! /ock s pur*as$4 
7iii7 ,pur*ase ( all out/&+ def]ral /ock
 ,! requirem5ts ( subclauses 7,i7 &     
7,,ii7 ( subp>agraph 7,b77iii7 %all be  
treat$ z met if ! /ock s pur*as$        
includes all ( ! corporation's out/&+   
def]ral /ock4  7iv7 ,report+ ,any       
corporation :i* has out/&+ def]ral /ock 
z ( ! beg9n+ ( any cal5d> ye> & :i*     
pur*ases any ( its out/&+ /ock dur+ su* 
cal5d> ye> %all include on its return ( 
tax = ! taxable ye> 9 :i*1 or ) :i*1 su*
 cal5d> ye> ends ! total doll> am\nt (  
its out/&+ /ock s pur*as$ dur+ su*      
cal5d> ye> & su* o!r in=mation z !      
,secret>y may require = purposes (      
adm9i/]+ ?is p>agraph4  7#e7 ,controll$ 
gr\ps ,= purposes ( ?is subsection1 all 

corporations :i* are memb]s ( ! same    
controll$ gr\p ( corporations 7z def9$ 9
 section #aefc7;a77 %all be treat$ z "o 
corporation4  7#f7 ,notice requirem5t   
,any corporation t transf]s qualifi$    
/ock to a qualifi$ employee %all1 at !  
"t t 7or a reasonable p]iod be=e7 an    
am\nt attributable to su* /ock w\ld 7b =
 ?is subsection7 fir/ be includible 9 ! 
gross income ( su* employee--  7,a7     
c]tify to su* employee t su* /ock is    
qualifi$ /ock1 &  7,b7 notify su*       
employee--  7i7 t ! employee may elect  
to def] income on su* /ock "u ?is       
subsection1 &  7ii7 t1 if ! employee    
makes su* an election--  7,i7 ! am\nt ( 
income recogniz$ at ! end ( ! def]ral   
p]iod w be bas$ on ! value ( ! /ock at !
 "t at :i* ! rights ( ! employee 9 su*  
/ock fir/ become transf]able or n       
subject to sub/antial risk ( =feiture1  
not)/&+ :e!r ! value ( ! /ock has decl9$
 dur+ ! def]ral p]iod1  7,,ii7 ! am\nt (
 su* income recogniz$ at ! end ( !      
def]ral p]iod w be subject to )hold+ "u 

section #cdja7;i7 at ! rate det]m9$ "u  
section #cdjb7t71 &  7,,iii7 !          
responsibilities ( ! employee 7z det]m9$
 by ! ,secret>y "u p>agraph             
7#c77;,a77ii77 ) respect to su* )hold+4 
4  7#b7 ,d$uction by employ] ,subsection
 7h7 ( section #hc ( ! ,int]nal ,rev5ue 
,code ( #aihf is am5d$ by /rik+ or      
7d77#b7 & ins]t+ 7d77#b71 or 7i74  7b7  
,)hold+  7#a7 ,"t ( )hold+ ,section     
#cdja ( ! ,int]nal ,rev5ue ,code ( #aihf
 is am5d$ by add+ at ! end ! foll[+ new 
subsection3  7i7 ,qualifi$ /ock = :i* an
 election is 9 effect "u section #hc7;i7
 ,= purposes ( subsection 7a71 qualifi$ 
/ock 7z def9$ 9 section #hc7;i77 )      
respect to :i* an election is made "u   
section #hc7;i7 %all be treat$ z wages--
  7#a7 receiv$ on ! e>lie/ date describ$
 9 section #hc7;i77#a77;,b71 &  7#b7 9  
an am\nt equal to ! am\nt includ$ 9     
income "u section #hc = ! taxable ye>   
:i* includes su* date4  4  7#b7 ,am\nt (
 )hold+ ,section #cdjb ( su* ,code is   
am5d$ by add+ at ! end ! foll[+ new     

subsection3  7t7 ,rate ( )hold+ = c]ta9 
/ock ,9 ! case ( any qualifi$ /ock 7z   
def9$ 9 section #hc7;i77 ) respect to   
:i* an election is made "u section      
#hc7;i7--  7#a7 ! rate ( tax "u         
subsection 7a7 %all n be less ?an !     
maximum rate ( tax 9 effect "u section  
#a1 &  7#b7 su* /ock %all be treat$ =   
purposes ( section #ceja7;b7 9 ! same   
mann] z a non-ca% fr+e b5efit4  4  7c7  
,coord9ation ) o!r def]r$ comp5sation   
rules  7#a7 ,election to apply def]ral  
to /atutory options  7,a7 ,inc5tive /ock
 options ,section #dbb7;b7 ( ! ,int]nal 
,rev5ue ,code ( #aihf is am5d$ by add+  
at ! end ! foll[+3 ,su* t]m %all n      
include any option if an election is    
made "u section #hc7;i7 ) respect to !  
/ock receiv$ 9 connection ) ! ex]cise ( 
su* option44  7,b7 ,employee /ock       
pur*ase plans ,section #dbc7;a7 ( su*   
,code is am5d$ by add+ at ! end ! foll[+
 flu% s5t5ce3  ,! prec$+ s5t5ce %all n  
apply to any %>e ( /ock ) respect to :i*
 an election is made "u section #hc7;i74

 4  7#b7 ,exclusion f def9ition (       
nonqualifi$ def]r$ comp5sation plan     
,subsection 7d7 ( section #dji;,a ( !   
,int]nal ,rev5ue ,code ( #aihf is am5d$ 
by add+ at ! end ! foll[+ new p>agraph3 
7#g7 ,treatm5t ( qualifi$ /ock ,an      
arrangem5t "u :i* an employee may       
receive qualifi$ /ock 7z def9$ 9 section
 #hc7;i77#b77 %all n be treat$ z a      
nonqualifi$ def]r$ comp5sation plan     
solely because ( an employee's ability  
to def] recognition ( income pursuant to
 an election "u section #hc7;i74  4  7d7
 ,in=mation report+ ,section #fjea7;a7 (
 ! ,int]nal ,rev5ue ,code ( #aihf is    
am5d$ by /rik+ & at ! end ( p>agraph    
7#ac71 by /rik+ ! p]iod at ! end (      
p>agraph 7#ad7 & ins]t+ a comma1 & by   
ins]t+ aft] p>agraph 7#ad7 ! foll[+ new 
p>agraphs3  7#ae7 ! am\nt excludable f  
gross income "u subp>agraph 7,a7 (      
section #hc7;i77#a71  7#af7 ! am\nt     
includible 9 gross income "u subp>agraph
 7,b7 ( section #hc7;i77#a7 ) respect to
 an ev5t describ$ 9 su* subp>agraph :i* 

occurs 9 su* cal5d> ye>1 &  7#ag7 !     
aggregate am\nt ( income :i* is be+     
def]r$ pursuant to elections "u section 
#hc7;i71 det]m9$ z ( ! close ( ! cal5d> 
ye>4  4  7e7 ,p5alty = failure ( employ]
 ,to provide notice ( tax consequ5ces   
,section #ffeb ( ! ,int]nal ,rev5ue     
,code ( #aihf is am5d$ by add+ at ! end 
! foll[+ new subsection3  7o7 ,failure  
to provide notice "u section #hc7;i7 ,9 
! case ( ea* failure to provide a notice
 z requir$ by section #hc7;i77#f71 at ! 
"t prescrib$ !re=1 unless x is %[n t su*
 failure is due to reasonable cause & n 
to willful neglect1 !re %all be paid1 on
 notice & dem& ( ! ,secret>y & 9 ! same 
mann] z tax1 by ! p]son fail+ to provide
 su* notice1 an am\nt equal to #ajj =   
ea* su* failure1 b ! total am\nt impos$ 
on su* p]son = all su* failures dur+ any
 cal5d> ye> %all n exce$ #ej1jjj4  4    
7f7 ,effective dates  7#a7 ,9 g5]al     
,except z provid$ 9 p>agraph 7#b71 !    
am5dm5ts made by ?is section %all apply 
to /ock attributable to options ex]cis$1

 or re/rict$ /ock units settl$1 aft]    
,decemb] #ca1 #bjaf4  7#b7 ,requirem5t  
to provide notice ,! am5dm5ts made by   
subsection 7e7 %all apply to failures   
aft] ,decemb] #ca1 #bjaf4  7g7          
,transition rule ,until su* "t z !      
,secret>y 7or ! ,secret>y's delegate7   
issue regulations or o!r guidance =     
purposes ( implem5t+ ! requirem5ts (    
p>agraph 7#b77;,c77i77,,ii7 ( section   
#hc7;i7 ( ! ,int]nal ,rev5ue ,code (    
#aihf 7z add$ by ?is section71 or !     
requirem5ts ( p>agraph 7#f7 ( su*       
section1 a corporation %all be treat$ z 
be+ 9 compliance ) su* requirem5ts      
7respectively7 if su* corporation       
complies ) a reasonable good fai?       
int]pretation ( su* requirem5ts4        
,septemb] #af1 #bjaf ,report$ ) an      
am5dm5t1 committ$ to ! ,committee ( !   
,:ole ,h\se on ! ,/ate ( ! ,union1 &    
ord]$ to be pr9t$