II 

108TH CONGRESS 

1ST SESSION S. 182

To amend the Internal Revenue Code of 1986 to provide that corporate 

tax benefits from stock option compensation expenses are allowed only 

to the extent such expenses are included in a corporation’s financial 

statements. 

IN THE SENATE OF THE UNITED STATES 

JANUARY 16, 2003

Mr. LEVIN (for himself, Mr. MCCAIN, Mr. DURBIN, and Mr. FEINGOLD) introduced the following bill; which was read twice and referred to the Committee on Finance 

A BILL

To amend the Internal Revenue Code of 1986 to provide 

that corporate tax benefits from stock option compensation expenses are allowed only to the extent such expenses are included in a corporation’s financial statements.

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 ‘‘Ending the Double 

5 Standard for Stock Options Act’’. 
2

•S 182 IS 

1 SEC. 2. REQUIREMENTS FOR CONSISTENT TREATMENT OF 

2 STOCK OPTIONS BY CORPORATIONS. 

3 (a) CONSISTENT TREATMENT FOR TAX DEDUC4 TION.—Section 83(h) of the Internal Revenue Code of 

5 1986 (relating to deduction of employer) is amended—

6 (1) by striking ‘‘In the case of’’ and inserting: 

7 ‘‘(1) IN GENERAL.—In the case of’’, and 

8 (2) by adding at the end the following new 

9 paragraph: 

10 ‘‘(2) SPECIAL RULES FOR PROPERTY TRANS11 FERRED PURSUANT TO STOCK OPTIONS.—

12 ‘‘(A) IN GENERAL.—In the case of prop13 erty transferred in connection with a stock op14 tion, the deduction otherwise allowable under 

15 paragraph (1) shall not exceed the amount the 

16 taxpayer has treated as an expense for the pur17 pose of ascertaining income, profit, or loss in a 

18 report or statement to shareholders, partners, 

19 or other proprietors (or to beneficiaries). In no 

20 event shall such deduction be allowed before the 

21 taxable year described in paragraph (1). 

22 ‘‘(B) SPECIAL RULES FOR CONTROLLED

23 GROUPS.—The Secretary shall prescribe rules 

24 for the application of this paragraph in cases 

25 where the stock option is granted by a parent 
3

•S 182 IS 

1 or subsidiary corporation (within the meaning 

2 of section 424) of the employer corporation.’’. 

3 (b) CONSISTENT TREATMENT FOR RESEARCH TAX

4 CREDIT.—Section 41(b)(2)(D) of the Internal Revenue 

5 Code of 1986 (defining wages for purposes of credit for 

6 increasing research expenses) is amended by inserting at 

7 the end the following new clause: 

8 ‘‘(iv) SPECIAL RULE FOR STOCK OP9 TIONS AND STOCK-BASED PLANS.—The 

10 term ‘wages’ shall not include any amount 

11 of property transferred in connection with 

12 a stock option and required to be included 

13 in a report or statement under section 

14 83(h)(2) until it is so included, and the 

15 portion of such amount which may be 

16 treated as wages for a taxable year shall 

17 not exceed the amount of the deduction al18 lowed under section 83(h) for such taxable 

19 year with respect to such amount.’’. 

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

21 this section shall apply to property transferred and wages 

22 provided on or after the date of the enactment of this Act.

Æ