I 

115TH CONGRESS 

1ST SESSION H. R. 1792 

To amend the Internal Revenue Code of 1986 to exclude from gross income 

compensation received by employees consisting of qualified distributions 

of employer stock. 

IN THE HOUSE OF REPRESENTATIVES 

MARCH 29, 2017 

Mr. ROHRABACHER (for himself and Mr. PETERSON) introduced the following 

bill; which was referred to the Committee on Ways and Means 

A BILL 

To amend the Internal Revenue Code of 1986 to exclude 

from gross income compensation received by employees 

consisting of qualified distributions of employer stock. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Expanding Employee 

5 Ownership Act of 2017’’. 

6 SEC. 2. QUALIFIED STOCK DISTRIBUTIONS TO EMPLOYEES. 

7 (a) IN GENERAL.—Part II of subchapter B of chap8 ter 1 of the Internal Revenue Code of 1986 is amended 

9 by inserting after section 83 the following new section: 


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1 ‘‘SEC. 83A. QUALIFIED STOCK DISTRIBUTIONS TO EMPLOY2 EES. 

3 ‘‘(a) IN GENERAL.—If an employee elects to have this 

4 section apply with respect to any qualified employee stock 

5 distribution, gross income shall not include— 

6 ‘‘(1) so many shares of employer securities re7 ceived by an individual in a qualified employee stock 

8 distribution of such individual’s employer as does 

9 not exceed the maximum stock amount, 

10 ‘‘(2) any gain on employer securities excluded 

11 from gross income under paragraph (1) if such em12 ployer security is held by such individual for not less 

13 than 10 years, and 

14 ‘‘(3) in the case of any qualified disposition of 

15 an employer security which is described in para16 graph (2) (and which meets the holding requirement 

17 of such paragraph), any gain on so much stock ac18 quired during the 60-day period beginning on the 

19 date of such disposition as does not exceed the fair 

20 market value of the employer security so disposed 

21 (determined as of the time of disposition). 

22 ‘‘(b) DEFINITIONS.—For purposes of this section— 

23 ‘‘(1) EMPLOYER SECURITIES.—The term ‘em24 ployer securities’ has the meaning given such term 

25 in section 409(l), except that paragraph (3) thereof 

26 shall be applied by substituting ‘the date of the 


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1 qualified employee stock distribution’ for ‘the date of 

2 the acquisition by the tax credit employee stock own3 ership plan’. Such term shall not include any stock 

4 unless such stock has voting rights. Any employer 

5 securities which are held in trust or cease to be held 

6 directly by the employee shall cease to be treated as 

7 employer securities and shall be treated for purposes 

8 of subsection (e) as having been disposed of by the 

9 employee. 

10 ‘‘(2) QUALIFIED EMPLOYEE STOCK DISTRIBU11 TION.—The term ‘qualified employee stock distribu12 tion’ means a distribution by an employer of em13 ployer securities to employees (determined as of the 

14 date of the distribution) of such employer as com15 pensation for services, except that there may be dis16 regarded any employee who (as of the date of the 

17 distribution)— 

18 ‘‘(A) has not attained age 18, 

19 ‘‘(B) has not completed 12 months of serv20 ice with the employer, 

21 ‘‘(C) is a nonresident alien, 

22 ‘‘(D) is a citizen or resident of a foreign 

23 jurisdiction (including any individual who is 

24 also a citizen or resident of the United States) 


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1 if the distribution to such individual is prohib2 ited under the laws of such foreign jurisdiction, 

3 ‘‘(E) holds 10 percent or more of the out4 standing stock of the employer, or 

5 ‘‘(F) is an employee whose compensation 

6 from the employer is subject to disclosure under 

7 rules promulgated by the Securities and Ex8 change Commission. 

9 ‘‘(3) MAXIMUM STOCK AMOUNT.—The term 

10 ‘maximum stock amount’ means, with respect to any 

11 distribution, the lowest number of employer securi12 ties received by any employee of the employer in 

13 such distribution. 

14 ‘‘(4) QUALIFIED DISPOSITION.— 

15 ‘‘(A) IN GENERAL.—The term ‘qualified 

16 disposition’ means, with respect to the disposi17 tion of any employer security described in para18 graph (2) of subsection (a) (and which meets 

19 the holding requirement of such paragraph) 

20 during any calendar year, the disposition of a 

21 number of shares of such security not in excess 

22 of the excess of— 

23 ‘‘(i) the applicable percentage of the 

24 aggregate number of shares of such secuVerDate Sep 11 2014 18:11 Apr 03, 2017 Jkt 069200 PO 00000 Frm 00004 Fmt 6652 Sfmt 6201 E:\BILLS\H1792.IH H1792

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1 rity received during the calendar year that 

2 such security was received, over 

3 ‘‘(ii) the aggregate number of shares 

4 of such security taken into account under 

5 this subparagraph for all prior calendar 

6 years. 

7 ‘‘(B) APPLICABLE PERCENTAGE.—For 

8 purposes of clause (i), the applicable percentage 

9 is, with respect to any calendar year following 

10 the calendar year in which such security was re11 ceived, the percentage determined in accordance 

12 with the following table: 

The applicable 

‘‘In the case of: percentage is: 

The first through tenth such calendar years .................... 0 percent

The eleventh such calendar year ....................................... 10 percent

The twelfth such calendar year ......................................... 20 percent

The thirteenth such calendar year .................................... 30 percent

The fourteenth such calendar year ................................... 40 percent

The fifteenth such calendar year ...................................... 50 percent

The sixteenth such calendar year ..................................... 60 percent

The seventeenth such calendar year ................................. 70 percent

The eighteenth such calendar year ................................... 80 percent

The nineteenth such calendar year ................................... 90 percent

Any subsequent calendar year .......................................... 100 percent. 

13 ‘‘(c) EMPLOYMENT TAXES.—Amounts excluded from 

14 gross income under subsection (a)(1) shall not be taken 

15 into account as wages for purposes of chapters 21, 22, 

16 23, 23A, and 24. 

17 ‘‘(d) COORDINATION WITH SECTION 83.—In the case 

18 of a transfer of employer securities to which subsection 

19 (a)(1) applies— 


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1 ‘‘(1) IN GENERAL.—Section 83 shall not apply. 

2 ‘‘(2) DEDUCTION BY EMPLOYER.—There shall 

3 be allowed as a deduction under section 162, to the 

4 person for whom were performed the services in con5 nection with which such securities were transferred, 

6 an amount equal to the fair market value of such se7 curities (determined as of the time of such transfer). 

8 Such deduction shall be allowed for the taxable year 

9 which includes the date of such transfer. 

10 ‘‘(e) RECAPTURE IF STOCK DISPOSED DURING RE11 QUIRED HOLDING PERIOD.—If an amount is excluded 

12 from gross income under subsection (a)(1) with respect 

13 to any employer security and the individual disposes of 

14 such security at any time during the 5-year period begin15 ning on the date that such individual received such secu16 rity— 

17 ‘‘(1) the gross income of such individual for the 

18 taxable year which includes the date of such disposi19 tion shall be increased by the amount so excluded, 

20 and 

21 ‘‘(2) the tax imposed by this chapter for such 

22 taxable year shall be increased by the sum of the 

23 amounts of tax which would have been imposed 

24 under subchapters A and B of chapters 21 and 22 


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1 if subsection (c) had not applied with respect to such 

2 amount. 

3 For purposes of this title and the Social Security Act, any 

4 increase in tax under paragraph (2) shall be treated as 

5 imposed under the provision of chapter 21 or 22 with re6 spect to which such increase relates. 

7 ‘‘(f) BASIS OF STOCK EQUAL TO FAIR MARKET

8 VALUE AT TIME OF TRANSFER.—Notwithstanding section 

9 1012, in the case of a transfer of employer securities to 

10 which subsection (a)(1) applies, the basis of such securi11 ties in the hands of the transferee immediately after such 

12 transfer shall be equal to the fair market value of such 

13 securities (determined as of the time of such transfer). 

14 ‘‘(g) AGGREGATION RULE.—Two or more persons 

15 who are treated as a single employer under subsection (b), 

16 (c), (m), or (o) of section 414 shall be treated as a single 

17 employer for purposes of this section. 

18 ‘‘(h) ELECTION.—The election under subsection (a) 

19 shall be made at such time and in such manner as the 

20 Secretary may prescribe. Once made, such election may 

21 be revoked only with the consent of the Secretary. 

22 ‘‘(i) REGULATIONS.—The Secretary shall issue such 

23 regulations or other guidance as may be necessary or ap24 propriate to carry out this section, including regulations 

25 or other guidance which— 


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1 ‘‘(1) provide for the application of this section 

2 to stock options, 

3 ‘‘(2) provide mechanisms by which to satisfy 

4 the requirements of this section in the event that an 

5 employee is inadvertently excluded from a distribu6 tion of employer securities (including a case where 

7 a service provider is treated as not an employee by 

8 the employer, but is determined to be an employee), 

9 and 

10 ‘‘(3) require such reporting under sections 6045 

11 and 6051 with respect to transfers of stock to which 

12 subsection (a) applies as the Secretary determines to 

13 be necessary or appropriate to carry out this sec14 tion.’’. 

15 (b) CLERICAL AMENDMENT.—The table of sections 

16 for such part is amended by inserting after the item relat17 ing to section 83 the following new item: 

‘‘Sec. 83A. Qualified stock distributions to employees.’’. 

18 (c) EFFECTIVE DATE.—The amendments made by 

19 this section shall apply to stock received by employees 

20 after the date of the enactment of this Act. 

Æ 


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