The House on Thursday passed a measure that would allow startup employees to defer taxes on their stock options.
Lawmakers passed H.R. 5719in a 287-124 vote, a week after the House Ways and Means Committee approved the measure by voice vote.
The legislation would let employees at startups defer taxes on their stock options for seven years, or until the stock is tradable on an established securities market. Bill sponsor Rep. Erik Paulsen (R-Minn.) noted that stock options are a large part of compensation for employees at startups.
“We should help these startups attract new employees and new talent and help those employees chase their dreams to seek new creative environments that could lead to thenext breakthrough innovation,” Paulsen said today on the House floor.
Only startups offering stock options to at least 80 percent of their workforce would be eligible for tax deferrals, and a company’s highest-paid executives would not be able todefer taxes on their stock under the legislation.
“Offering stock options not only allows startups to attract the workers they need, it also gives employees a greater stake in the success of the company,” Majority Leader Kevin McCarthy (R-Calif.) said on the House floor.“But unfortunately, the current tax code punishes many employees who own stock, taxing them before they even have the opportunity to sell the stock to pay the bill.”
The measure is part of McCarthy’s push for legislation designed to foster innovation in business and technology.