I 
115TH CONGRESS 
1ST SESSION H. R. 3084 
To amend the Internal Revenue Code of 1986 to modify the tax treatment 
of certain equity grants. 
IN THE HOUSE OF REPRESENTATIVES 
JUNE 27, 2017 
Mr. PAULSEN (for himself and Mr. CROWLEY) 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 modify 
the tax treatment of certain equity grants. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. SHORT TITLE. 
This Act may be cited as the ‘‘Empowering Employ-
ees through Stock Ownership Act’’. 
SEC. 2. TREATMENT OF QUALIFIED EQUITY GRANTS. 
(a) IN GENERAL.—Section 83 of the Internal Rev-
enue Code of 1986 is amended by adding at the end the 
following new subsection: 
‘‘(i) QUALIFIED EQUITY GRANTS.— 
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‘‘(1) IN GENERAL.—For purposes of this sub-
title— 
‘‘(A) TIMING OF INCLUSION.—If qualified 
stock is transferred to a qualified employee who 
makes an election with respect to such stock 
under this subsection, subsection (a) shall be 
applied by including the amount determined 
under such subsection with respect to such 
stock in income of the employee in the taxable 
year determined under subparagraph (B) in lieu 
of the taxable year described in subsection (a). 
‘‘(B) TAXABLE YEAR DETERMINED.—The 
taxable year determined under this subpara-
graph is the taxable year of the employee which 
includes the earliest of— 
‘‘(i) except as provided in subpara-
graph (C), the first date such qualified 
stock becomes transferable (including, sole-
ly for purposes of this clause, becoming 
transferable to the employer), 
‘‘(ii) the date the employee first be-
comes an excluded employee, 
‘‘(iii) except as provided in subpara-
graph (C), the first date on which any 
stock of the corporation which issued the 
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qualified stock becomes readily tradable on 
an established securities market (as deter-
mined by the Secretary, but not including 
any market unless such market is recog-
nized as an established securities market 
by the Secretary for purposes of a provi-
sion of this title other than this sub-
section), 
‘‘(iv) the date that is 7 years after the 
first date the rights of the employee in 
such stock are transferable or are not sub-
ject to a substantial risk of forfeiture, 
whichever occurs earlier, or 
‘‘(v) the date on which the employee 
revokes (at such time and in such manner 
as the Secretary may provide) the election 
under this subsection with respect to such 
stock. 
‘‘(C) SPECIAL RULE FOR STOCK SUBJECT 
TO LOCK-UP PERIODS.— 
‘‘(i) IN GENERAL.—In the case of any 
qualified stock which is subject to a lock- 
up period— 
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‘‘(I) such stock shall not be treat-
ed as transferable under subpara-
graph (B)(i), and 
‘‘(II) such stock shall not be 
treated as readily tradable on an es-
tablished securities market under sub-
paragraph (B)(iii), 
before the end of the lock-up period. 
‘‘(ii) LOCK-UP PERIOD.—For purposes 
of this subparagraph, the term ‘lock-up pe-
riod’ means any period (not to exceed 180 
days)— 
‘‘(I) which begins on the date of 
an initial public offering, and 
‘‘(II) during which the qualified 
employee agrees, pursuant to an un-
derwriting agreement entered into 
pursuant to such initial public offer-
ing, not to sell, otherwise dispose of, 
or hedge any qualified stock. 
‘‘(2) QUALIFIED STOCK.— 
‘‘(A) IN GENERAL.—For purposes of this 
subsection, the term ‘qualified stock’ means, 
with respect to any qualified employee, any 
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stock in a corporation which is the employer of 
such employee, if— 
‘‘(i) such stock is received— 
‘‘(I) in connection with the exer-
cise of an option, or 
‘‘(II) in settlement of a restricted 
stock unit, and 
‘‘(ii) such option or restricted stock 
unit was granted by the corporation— 
‘‘(I) in connection with the per-
formance of services as an employee, 
and 
‘‘(II) during a calendar year in 
which such corporation was an eligible 
corporation. 
‘‘(B) LIMITATION.—The term ‘qualified 
stock’ shall not include any stock if the em-
ployee may sell such stock to, or otherwise re-
ceive cash in lieu of stock from, the corporation 
at the time that the rights of the employee in 
such stock first become transferable or not sub-
ject to a substantial risk of forfeiture. 
‘‘(C) ELIGIBLE CORPORATION.—For pur-
poses of subparagraph (A)(ii)(II)— 
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‘‘(i) IN GENERAL.—The term ‘eligible 
corporation’ means, with respect to any 
calendar year, any corporation if— 
‘‘(I) no stock of such corporation 
(or any predecessor of such corpora-
tion) is readily tradable on an estab-
lished securities market (as deter-
mined under paragraph (1)(B)(iii)) 
during any preceding calendar year, 
and 
‘‘(II) such corporation has a writ-
ten plan for such calendar year which 
meets the requirements of clause (ii). 
‘‘(ii) PLAN REQUIREMENTS.—A writ-
ten plan meets the requirements of this 
clause with respect to any calendar year 
if— 
‘‘(I) not less than 80 percent of 
all employees who first become em-
ployees of such corporation during 
such calendar year are granted stock 
options, or restricted stock units, with 
the same rights and privileges to re-
ceive qualified stock, and 
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‘‘(II) not less than 80 percent of 
all employees who were employees of 
such corporation during the preceding 
calendar year hold stock options, or 
restricted stock units, with the same 
rights and privileges to receive quali-
fied stock. 
‘‘(iii) 
SAME
RIGHTS
AND
PRIVI-
LEGES.—For purposes of clause (ii)— 
‘‘(I) except as provided in sub-
clauses (II) and (III), the determina-
tion of rights and privileges with re-
spect to stock shall be made in a simi-
lar 
manner 
as 
under 
section 
423(b)(5), 
‘‘(II) employees shall not fail to 
be treated as having the same rights 
and privileges to receive qualified 
stock solely because the number of 
shares available to all employees is not 
equal in amount, so long as the num-
ber of shares available to each em-
ployee is more than a de minimis 
amount, and 
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‘‘(III) rights and privileges with 
respect to the exercise of an option 
shall not be treated as the same as 
rights and privileges with respect to 
the settlement of a restricted stock 
unit. 
‘‘(iv) EMPLOYEE.—For purposes of 
clause (ii), the term ‘employee’ shall not 
include— 
‘‘(I) any employee described in 
section 4980E(d)(4), 
‘‘(II) any excluded employee, and 
‘‘(III) with respect to any cor-
poration for any calendar year, any 
individual who provides services for 
such corporation in the United States 
(or any possession of the United 
States) for a period of less than 90 
days during such calendar year. 
‘‘(v) SPECIAL
RULE
FOR
CALENDAR 
YEARS BEFORE 2020.—In the case of any 
calendar year beginning before January 1, 
2020, clause (ii) shall be applied without 
regard to whether the rights and privileges 
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(2) REQUIREMENT TO PROVIDE NOTICE.—The 
amendments made by subsection (e) shall apply to 
failures after December 31, 2019. 
Æ 
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