,i  #aae? ,,congress  #a/ ,session  ,h4 
,r4 #cjhd  ,,9 ,,! ,,h\se ,,(           
,,repres5tatives  ,june #bg1 #bjag,mr4  
,pauls5 7= himself & ,mr4 ,cr[ley7      
introduc$ ! foll[+ bill2 :i* 0 ref]r$ to
 ! ,committee on ,ways & ,means  ,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 ,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 subtitle-- 7,a7 ,tim+ 
( inclusion ,if qualifi$ /ock is        
transf]r$ to a qualifi$ employee :o     
makes an election ) respect to su* /ock 
"u ?is subsection1 subsection 7a7 %all  
be appli$ by includ+ ! am\nt det]m9$ "u 
su* subsection ) respect to su* /ock 9  
income ( ! employee 9 ! taxable ye>     
det]m9$ "u subp>agraph 7,b7 9 lieu ( !  

taxable ye> describ$ 9 subsection 7a74  
7,b7 ,taxable ye> det]m9$ ,! taxable ye>
 det]m9$ "u ?is subp>agraph is ! taxable
 ye> ( ! employee :i* includes ! e>lie/ 
(--  7i7 except z provid$ 9 subp>agraph 
7,c71 ! fir/ date su* qualifi$ /ock     
becomes transf]able 7includ+1 solely =  
purposes ( ?is clause1 becom+           
transf]able to ! employ]71  7ii7 ! date 
! employee fir/ becomes an exclud$      
employee1  7iii7 except z provid$ 9     
subp>agraph 7,c71 ! 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,c7 ,special rule = /ock    
subject to lock-up p]iods  7i7 ,9 g5]al 
,9 ! case ( any qualifi$ /ock :i* is    
subject to a lock-up p]iod-- 7,i7 su*   
/ock %all n be treat$ z transf]able "u  
subp>agraph 7,b77i71 &  7,,ii7 su* /ock 
%all n be treat$ z readily tradable on  
an e/abli%$ securities m>ket "u         
subp>agraph 7,b77iii71  be=e ! end ( !  
lock-up p]iod4  7ii7 ,lock-up p]iod ,=  
purposes ( ?is subp>agraph1 ! t]m       
lock-up p]iod means any p]iod 7n to     
exce$ #ahj days7-- 7,i7 :i* beg9s on !  
date ( an initial public (f]+1 &  7,,ii7
 dur+ :i* ! qualifi$ employee agrees1   
pursuant to an und]writ+ agreem5t ent]$ 
into pursuant to su* initial public     
(f]+1 n to sell1 o!rwise dispose (1 or  
h$ge any qualifi$ /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 grant$ 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$+
 cal5d> ye>1 &  7,,ii7 su* corporation  
has a writt5 plan = su* cal5d> ye> :i*  
meets ! requirem5ts ( clause 7ii74  7ii7
 ,plan requirem5ts ,a writt5 plan meets 
! requirem5ts ( ?is clause ) respect to 
any cal5d> ye> if-- 7,i7 n less ?an #hj 
p]c5t ( all employees :o fir/ become    
employees ( su* corporation dur+ su*    
cal5d> ye> are grant$ /ock options1 or  
re/rict$ /ock units1 ) ! same rights &  
privileges to receive qualifi$ /ock1 &  
7,,ii7 n less ?an #hj p]c5t ( all       
employees :o 7 employees ( su*          
corporation dur+ ! prec$+ cal5d> ye>    
hold /ock options1 or re/rict$ /ock     
units1 ) ! same rights & privileges to  
receive qualifi$ /ock4  7iii7 ,same     
rights & privileges ,= purposes ( clause
 7ii7-- 7,i7 except z provid$ 9         
subclauses 7,,ii7 & 7,,iii71 !          
det]m9ation ( rights & privileges )     
respect to /ock %all be made 9 a simil> 
mann] z "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  7iv7 
,employee ,= purposes ( clause 7ii71 !  
t]m employee %all n include-- 7,i7 any  
employee describ$ 9 section             
#dihj;,e7d77#d71  7,,ii7 any exclud$    
employee1 &  7,,iii7 ) respect to any   
corporation = any cal5d> ye>1 any       
individual :o provides s]vices = su*    
corporation 9 ! ,unit$ ,/ates 7or any   
possession ( ! ,unit$ ,/ates7 = a p]iod 
( less ?an #ij days dur+ su* cal5d> ye>4
  7v7 ,special rule = cal5d> ye>s be=e  
#bjbj ,9 ! case ( any cal5d> ye> beg9n+ 
be=e ,janu>y #a1 #bjbj1 clause 7ii7 %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 are
 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 0 =   
any ( ! #aj prec$+ taxable ye>s "o ( !  
#d highe/ comp5sat$ (fic]s ( su*        
corporation1 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/ 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 & %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$+ !     
cal5d> ye> :i* includes ! fir/ date !   
rights ( ! employee 9 su* /ock are      
transf]able or are n subject to a       
sub/antial risk ( =feiture1 unless--    
7,i7 n less ?an #be p]c5t ( ! total     
doll> am\nt ( ! /ock s pur*as$ 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$emptions  7i7   
,def]ral /ock ,= purposes ( ?is         
p>agraph1 ! t]m def]ral /ock means /ock 
) respect to :i* an election is 9 effect
 "u ?is subsection4  7ii7 ,def]ral /ock 
) respect to any individual n tak5 into 
acc\nt if individual holds def]ral /ock 
) long] def]ral p]iod ,/ock pur*as$ by a
 corporation f any individual %all n be 
treat$ z def]ral /ock = purposes (      
subp>agraph 7,b77iii7 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 treat$ z a s+le    
employ] "u section #dad7;b7 %all be     
treat$ z "o corporation4  7#f7 ,notice  

requirem5t ,any corporation :i* 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  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#b77 ) 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 #dbc ( su* ,code 
is am5d$-- 7i7 by add+ at ! end (       
subsection 7a7 ! foll[+ flu% s5t5ce3  ,!
 prec$+ s5t5ce %all n apply to any %>e (
 /ock ) respect to :i* an election is   
made "u section #hc7;i74 2 &  7ii7 9    
subsection 7b77#e71 by /rik+ & be=e !   
plan & by ins]t+ 1 & ! rules ( section  
#hc7;i7 %all apply 9 det]m9+ :i*        
employees h a "r to make an election "u 
su* section be=e ! semicolon at ! end4  
7,c7 ,con=m+ am5dm5ts  7i7 ,section     
#caba7;a77#bb77;,a7 ( ! ,int]nal ,rev5ue

 ,code ( #aihf is am5d$ by ins]t+ 7o!r  
?an qualifi$ /ock 7z def9$ 9 section    
#hc7;i77#b77 ) respect to :i* an        
election is 9 effect "u section #hc7;i77
 aft] a %>e ( /ock4  7ii7 ,section      
#bji7;a77#ai77;,a7 ( ! ,social ,security
 ,act 7#db ,u4,s4,c4 #dji7 is am5d$ by  
ins]t+ 7o!r ?an qualifi$ /ock 7z def9$ 9
 section #hc7;i77#b7 ( ! ,int]nal       
,rev5ue ,code ( #aihf7 ) respect to :i* 
an election is 9 effect "u section      
#hc7;i7 ( su* ,code7 aft] a %>e ( /ock4 
7iii7 ,section #cbca7;e77#ab77;,a7 ( !  
,int]nal ,rev5ue ,code ( #aihf is am5d$ 
by ins]t+ 7o!r ?an qualifi$ /ock 7z     
def9$ 9 section #hc7;i77#b77 ) respect  
to :i* an election is 9 effect "u       
section #hc7;i77 aft] a %>e ( /ock4     
7iv7 ,section #ccjf7;b77#ai77;,a7 ( !   
,int]nal ,rev5ue ,code ( #aihf is am5d$ 
by ins]t+ 7o!r ?an qualifi$ /ock 7z     
def9$ 9 section #hc7;i77#b77 ) respect  
to :i* an election is 9 effect "u       
section #hc7;i77 aft] a %>e ( /ock4     
7#b7 ,treatm5t "u nonqualifi$ def]r$    

comp5sation plan ,subsection 7d7 (      
section #dji;,a ( su* ,code 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 plan1 or 
z fail+ to meet ! requirem5ts ( ?is     
section1 solely because ( an employee's 
election1 or ability to make an         
election1 to def] recognition ( income  
"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#ad71 by /rik+ ! 
p]iod at ! end ( p>agraph 7#ae7 & ins]t+
 a comma1 & by ins]t+ aft] p>agraph     
7#ae7 ! foll[+ new p>agraphs3  7#af7 !  
am\nt includible 9 gross income "u      
subp>agraph 7,a7 ( section #hc7;i77#a7 )
 respect to an ev5t describ$ 9          
subp>agraph 7,b7 ( su* section :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  7p7 ,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 ,guidance ,n lat]
 ?an ,decemb] #ca1 #bjah1 ! ,secret>y ( 
! ,treasury 7or ! ,secret>y's delegate7 
%all issue guidance ) respect to section
 #hc7;i7 ( ! ,int]nal ,rev5ue ,code (   
#aihf 7z add$ by ?is section71 includ+  

guidance relat+ to--  7#a7 ! det]m9ation
 ! "t /ock fir/ becomes transf]able "u  
su* section2  7#b7 ! det]m9ation (      
rights & privileges ) respect to /ock "u
 p>agraph 7#b77;,c77iii7 ( su* section2 
&  7#c7 ! requirem5ts ( p>agraphs       
7#b77;,c77i77,,ii7 & 7#f7 ( su* section4
  7g7 ,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 #bjai4  7#b7 ,requirem5t  
to provide notice ,! am5dm5ts made by   
subsection 7e7 %all apply to failures   
aft] ,decemb] #ca1 #bjai4