Employee Stock Options: Tax Treatment and Tax Issues (CRS Report for Congress)
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| Release Date |
Revised June 15, 2012 |
| Report Number |
RL31458 |
| Report Type |
Report |
| Authors |
James M. Bickley, Government and Finance Division |
| Source Agency |
Congressional Research Service |
| Older Revisions |
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Summary:
This report explains the "book-tax gap" as it relates to stock options and S. 1491 (EndingExcessive Corporate Deductions for Stock Options Act). U.S. businesses are subject to a dualreporting system. One set of rules applies when they report financial or "book" profits to thepublic. Another set of rules applies when they report taxable income to the Internal RevenueService. The "book-tax" gap is the excess of reported financial accounting income over taxableincome.The following seven key laws and regulations concerning stock options are described: Section162(m)-"Excessive Remuneration," Sarbanes-Oxley Act: Stock Option Disclosure Reforms,SEC's 2003 Requirement of Approval of Compensation Plans, FASB Rule for Expensing StockOptions, American Jobs Creation Act of 2004 (Section 409A), IRS Schedule M-3, and SEC's2006 Executive Compensation Disclosure Rules. Finally, this report examines the issue that somecompanies backdated options (retroactively selected, without disclosure, dates for grantingoptions) to times when prices of their stock were low.This report will be updated as issues develop and any new legislation is introduced.Bills: S. 1491
