For ESOPs, it would introduce changes that would make it difficult for companies to use S corporation ESOPs to avoid taxes for the primary benefit of just a few owners. It would also allow employees to reinvest dividends received on ESOP shares back into company stock on a pretax basis. The bill seems likely to pass as it has few opponents in either the House or the Senate. The only obstacle would be if the costs of other tax changes forces revision of the bill s more costly provisions. Smaller companies are more likely than larger ones to extend options all the way down to non-exempt employees.
Smaller companies are even more likely to offer new-hire options across the board.
According to the Employee Share Ownership Centre in London, the Blair government has introduced legislation that would expand the existing Enterprise Management Incentive plan. Capital gains tax generally will be paid only when the shares are sold, and the longer assets are held, the lower the rate. If an employee holds the options or shares from the exercise of options for four years or more, the top capital gains tax rate would be just 10 per cent. Employees can receive up to 100,000 pounds in option value. The new proposal, which appears certain to pass, would eliminate the restriction on the number of employees eligible, but limit the total amount that could be granted to 3 million pounds per company.