,,ii  #aadth ,,congress  #b;d ,session  
,s4 #caeb  ,,in ,,the ,,senate ,,of     
,,the ,,united ,,states  ,july #aa1     
#bjaf ,mr4 ,warner 7for himself and ,mr4
 ,heller7 introduced the following bill2
 which was read twice and referred to   
the ,committee on ,finance  ,a ,,bill   
,to amend the ,internal ,revenue ,code  
of #aihf to modify the tax treatment of 
certain equity grants4  #a4 ,short title
  ,this ,act may be cited as the        
,empowering ,employees through ,stock   
,ownership ,act4  #b4 ,treatment of     
qualified equity grants  7a7 ,in general
  7#a7 ,election to defer income        
,section #hc of the ,internal ,revenue  
,code of #aihf is amended by adding at  
the end the following new subsection3   
7i7 ,qualified equity grants  7#a7 ,in  
general ,for purposes of this subtitle1 
if qualified stock is transferred to a  
qualified employee who makes an election
 under this subsection--  7,a7 no amount
 shall be included in income under      
subsection 7a7 in the first taxable year

 in which the rights of the employee in 
such stock are transferable or are not  
subject to a substantial risk of        
forfeiture1 whichever is applicable1 and
  7,b7 an amount equal to the amount    
which would be included in income of the
 employee under subsection 7a7          
7determined without regard to this      
subsection7 shall be included in income 
in the taxable year of the employee     
which includes the earliest of--  7i7   
the date such qualified stock is sold1  
exchanged1 or otherwise transferred1    
7ii7 the date the employee first becomes
 an excluded employee1  7iii7 the first 
date on which any stock of the          
corporation which issued the qualified  
stock becomes readily tradable on an    
established securities market1  7iv7 the
 date that is #g years after the first  
date the rights of the employee in such 
stock are transferable or are not       
subject to a substantial risk of        
forfeiture1 whichever occurs earlier1 or
  7v7 the date on which the employee    

elects under this clause to include the 
amount in income4  7#b7 ,qualified stock
  7,a7 ,in general ,for purposes of this
 subsection1 the term qualified stock   
means any stock in a corporation if--   
7i7 the right to receive such stock was 
provided by the corporation-- 7,i7 in   
connection with the performance of      
services as an employee1 and  7,,ii7    
such right was received in year in which
 such corporation was an eligible       
corporation1 and  7ii7 such stock is    
received--  7,i7 in connection with the 
exercise of an option1 or  7,,ii7 in    
settlement of a restricted stock unit4  
7,b7 ,limitation ,the term qualified    
stock shall not include any stock if the
 employee may sell to1 or otherwise     
receive cash in lieu of stock from1 the 
corporation at the time that the rights 
of the employee are transferrable or are
 not subject to a substantial risk of   
forfeiture4  7,c7 ,eligible corporation 
,for purposes of subparagraph           
7,a77i77,,ii7-- 7i7 ,in general ,the    

term eligible corporation means1 with   
respect to any calendar year1 any       
corporation if--  7,i7 no stock of such 
corporation is readily tradable on an   
established securities market during    
such calendar year or any preceding     
calendar year1 and  7,,ii7 such         
corporation has a written plan under    
which not less than #hj percent of all  
employees have the same rights and      
privileges to receive qualified stock   
for such calendar year4  7ii7 ,same     
rights and privileges  ,for purposes of 
clause 7i77,,ii7-- 7,i7 except as       
provided in subclauses 7,,ii7 and       
7,,iii71 the determination of rights and
 privileges with respect to stock shall 
be determined in a similar manner as    
provided under section #dbc7;b77#e71    
7,,ii7 employees shall not fail to be   
treated as having the same rights and   
privileges to receive qualified stock   
solely because the number of shares     
available to all employees are not equal
 in amount1 so long as the number of    

shares available to each employee is    
more than a de minimis amount1 and      
7,,iii7 the right to receive qualified  
stock described subparagraph            
7,a77ii77,i7 shall not be treated as the
 same right or privilege as the right to
 receive qualified stock described in   
subparagraph 7,a77ii77,,ii74  7iii7     
,employee ,for purposes of clause       
7i77,,ii71 the term employee shall not  
include any employee described in       
section #dihj;,e7d77#d7 or any excluded 
employee4  7iv7 ,special rule for       
calendar years before #bjag ,in the case
 of any calendar year beginning before  
,january #a1 #bjag1 clause 7i77,,ii7    
shall be applied without regard to      
whether the rights and privileges with  
respect to the qualified stock are the  
same4  7#c7 ,qualified employee2        
excluded employee ,for purposes of this 
subsection-- 7,a7 ,in general ,the term 
qualified employee means any individual 
who--  7i7 is not an excluded employee1 
and  7ii7 agrees to meet such           

requirements as determined by the       
,secretary to be necessary to ensure    
that the withholding requirements of the
 corporation under chapter #bd with     
respect to the qualified stock are met4 
7,b7 ,excluded employee ,the term       
excluded employee means1 with respect to
 any corporation1 any individual-- 7i7  
who is or has been at any prior time a  
#a-percent owner 7within the meaning of 
section #daf7;i77#a77;,b77ii771  7ii7   
who is or has been at any prior time--  
7,i7 the chief executive officer of such
 corporation or an individual acting in 
such a capacity1 or  7,,ii7 the chief   
financial officer of such corporation or
 an individual acting in such a         
capacity1  7iii7 who bears a            
relationship described in section       
#cah7;a77#a7 to any individual described
 in subclause 7,i7 or 7,,ii7 of clause  
7ii71 or  7iv7 who is or has been for   
any prior taxable year one of the #d    
highest compensated officers of such    
corporation determined on the basis of  

the shareholder disclosure rules for    
compensation under the ,securities      
,exchange ,act of #aicd 7as if such     
rules applied to such corporation74     
7#d7 ,election  7,a7 ,time for making   
election ,an election with respect to   
qualified stock shall be made under this
 subsection no later than #cj days after
 the first time the rights of the       
employee in such stock are transferable 
or are not subject to a substantial risk
 of forfeiture1 whichever occurs        
earlier4  7,b7 ,limitations ,no election
 may be made under this section with    
respect to any qualified stock if-- 7i7 
the qualified employee has made an      
election under subsection 7b7 with      
respect to such qualified stock1 or     
7ii7 any stock of the corporation which 
issued the qualified stock is readily   
tradable on an established securities   
market at any time before the election  
is made4  7#e7 ,other rules  7,a7       
,controlled groups ,for purposes of this
 subsection1 all corporations which are 

members of the same controlled group of 
corporations 7as defined in section     
#aefc7;a77 shall be treated as one      
corporation4  7,b7 ,notice requirement  
,any corporation that transfers         
qualified stock to an employee shall    
notify such employee that-- 7i7 the     
employee may elect to defer income on   
such stock under this subsection1 and   
7ii7 if the employee makes such an      
election1 the amount of income          
recognized at the end of the deferral   
period will be based on the value of the
 stock at the time at which the rights  
of the employee in such stock are       
transferable or are not subject to      
substantial risk of forfeiture1         
notwithstanding whether the value of the
 stock has declined during the deferral 
period4  4  7#b7 ,deduction by employer 
,subsection 7h7 of section #hc of the   
,internal ,revenue ,code of #aihf is    
amended by striking or 7d77#b7 and      
inserting 7d77#b71 or 7i74  7b7         
,withholding  7#a7 ,time of withholding 

,section #cdja of the ,internal ,revenue
 ,code of #aihf is amended by adding at 
the end the following new subsection3   
7i7 ,qualified stock for which an       
election is in effect under section     
#hc7;i7 ,for purposes of subsection 7a71
 qualified stock 7as defined in section 
#hc7;i77 with respect to which an       
election is made under section #hc7;i7  
shall be treated as wages--  7#a7       
received on the earliest date described 
in section #hc7;i77#a77;,b71 and  7#b7  
in an amount equal to the amount        
included in income under section #hc for
 the taxable year which includes such   
date4  4  7#b7 ,amount of withholding   
,section #cdjb of such ,code is amended 
by adding at the end the following new  
subsection3  7t7 ,rate of withholding   
for certain stock ,in the case of any   
qualified stock 7as defined in section  
#hc7;i77 with respect to which an       
election is made under section #hc7;i71 
the rate of tax under subsection 7a7    
shall not be less than the maximum rate 

of tax in effect under section #a4  4   
7c7 ,coordination with other deferred   
compensation rules  7#a7 ,election to   
apply deferral to statutory options     
7,a7 ,incentive stock options ,section  
#dbb7;b7 of the ,internal ,revenue ,code
 of #aihf is amended by inserting or any
 option with respect to which an        
election is made under section #hc7;i7  
after as an incentive stock option4     
7,b7 ,employee stock purchase plans     
,section #dbc7;a7 of such ,code is      
amended by adding at the end the        
following flush sentence3  ,the         
preceding sentence shall not apply to   
any share of stock or option with       
respect to which an election is made    
under section #hc7;i74 4  7#b7          
,exclusion from definition of           
nonqualified deferred compensation plan 
,subsection 7d7 of section #dji;,a of   
the ,internal ,revenue ,code of #aihf is
 amended by adding at the end the       
following new paragraph3  7#g7          
,treatment of qualified stock ,receipt  

of stock shall not be treated as a      
nonqualified deferred compensation plan 
solely because of an election under     
#hc7;i74  4  7d7 ,information reporting 
,section #fjea of the ,internal ,revenue
 ,code of #aihf is amended by inserting 
after paragraph 7#f7 the following new  
paragraph3  7#g7 the amounts subject to 
subparagraphs 7,a7 and 7,b7 of section  
#hc7;i77#a71  4  7e7 ,penalty for       
failure of employer ,to provide notice  
of tax consequences ,section #ffeb of   
the ,internal ,revenue ,code of #aihf is
 amended by adding at the end the       
following new subsection3  7o7 ,failure 
,to provide notice under section #hc7;i7
 ,in the case of each failure to provide
 a notice as required by section        
#hc7;i77#e77;,b71 at the time prescribed
 therefor1 unless it is shown that such 
failure is due to reasonable cause and  
not to willful neglect1 there shall be  
paid1 on notice and demand of the       
,secretary and in the same manner as    
tax1 by the person failing to provide   

such notice1 an amount equal to #ajj for
 each such failure1 but the total amount
 imposed on such person for all such    
failures during any calendar year shall 
not exceed #ej1jjj4  4  7f7 ,effective  
dates  7#a7 ,in general ,except as      
provided in paragraph 7#b71 the         
amendments made by this section shall   
apply to any property--  7,a7 in which  
the rights of the person who has the    
beneficial interest in such property are
 not transferable before ,january #a1   
#bjag1 and  7,b7 which is subject to a  
substantial risk of forfeiture before   
such date4  7#b7 ,requirement to provide
 notice ,the amendments made by         
subsection 7e7 shall apply to failures  
after ,december #ca1 #bjaf4