I 

111TH CONGRESS 

1ST SESSION H. R. 692 

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 

JANUARY 26, 2009 

Mr. ROHRABACHER (for himself, Mr. JONES, and Mr. PAUL) 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. QUALIFIED STOCK DISTRIBUTIONS TO EM4 PLOYEES. 

5 (a) IN GENERAL.—Part III of subchapter B of chap6 ter 1 of the Internal Revenue Code of 1986 is amended 

7 by inserting after section 139A the following new section: 


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1 ‘‘SEC. 139B. QUALIFIED STOCK DISTRIBUTIONS TO EMPLOY2 EES. 

3 ‘‘(a) IN GENERAL.—Gross income shall not include— 

4 ‘‘(1) so many shares of any stock received by an 

5 individual in a qualified employee stock distribution 

6 of such individual’s employer as does not exceed the 

7 maximum stock amount, 

8 ‘‘(2) any gain on stock excluded from gross in9 come under paragraph (1) if such stock is held by 

10 such individual for not less than 10 years, and 

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

12 stock which is described in paragraph (2) (and 

13 which meets the holding requirement of such para14 graph), any gain on so much stock acquired during 

15 the 60-day period beginning on the date of such dis16 position as does not exceed the fair market value of 

17 the stock so disposed (determined as of the time of 

18 disposition). 

19 ‘‘(b) DEFINITIONS AND SPECIAL RULES.—For pur20 poses of this section— 

21 ‘‘(1) QUALIFIED EMPLOYEE STOCK DISTRIBU22 TION.—The term ‘qualified employee stock distribu23 tion’ means a distribution by an employer of stock 

24 of such employer to all employees (determined as of 

25 the date of the distribution) of such employer as 

26 compensation for services. 


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1 ‘‘(2) MAXIMUM STOCK AMOUNT.—The term 

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

3 distribution, the lowest number of shares of stock of 

4 the employer received by any employee of the em5 ployer in such distribution. 

6 ‘‘(3) QUALIFIED DISPOSITION.— 

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

8 disposition’ means, with respect to the disposi9 tion of any stock described in paragraph (2) 

10 during any calendar year, the disposition of a 

11 number of shares of such stock not in excess of 

12 the excess of— 

13 ‘‘(i) the applicable percentage of the 

14 aggregate number of shares of such stock 

15 received during the calendar year that such 

16 stock was received, over 

17 ‘‘(ii) the aggregate number of shares 

18 of such stock taken into account under this 

19 subparagraph for all prior calendar years. 

20 ‘‘(B) APPLICABLE PERCENTAGE.—For 

21 purposes of clause (i), the applicable percentage 

22 is, with respect to any calendar year following 

23 the calendar year in which such stock was re24 ceived, the percentage determined in accordance 

25 with the following table: 


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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. 

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

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

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

4 23, 23A, and 24. 

5 ‘‘(d) RECAPTURE IF STOCK DISPOSED DURING RE6 QUIRED HOLDING PERIOD.—If an amount is excluded 

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

8 to any stock and the individual disposes of such stock at 

9 any time during the 5-year period beginning on the date 

10 that such individual received such stock— 

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

12 taxable year which includes the date of such disposi13 tion shall be increased by the amount so excluded, 

14 and 

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

16 taxable year shall be increased by the sum of the 

17 amounts of tax which would have been imposed 

18 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 ‘‘(e) REGULATIONS.—The Secretary shall issue such 

8 regulations as may be necessary or appropriate to carry 

9 out this section, including regulations which provide for 

10 the application of this section to stock options.’’. 

11 (b) CLERICAL AMENDMENT.—The table of section 

12 for such part is amended by inserting after the item relat13 ing to section 139A the following new item: 

‘‘Sec. 139B. Qualified stock distributions to employees.’’. 

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

15 this section shall apply to stock received by employees 

16 after the date of the enactment of this Act. 

Æ 


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