I 
113TH CONGRESS 
2D SESSION 
H. R. 4089 
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 
FEBRUARY 25, 2014 
Mr. ROHRABACHER (for himself, Mr. MCKINLEY, and Mr. JONES) 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. 
Be it enacted by the Senate and House of Representa-
tives of the United States of America in Congress assembled, 
SECTION 1. QUALIFIED STOCK DISTRIBUTIONS TO EM-
PLOYEES. 
(a) IN GENERAL.—Part III of subchapter B of chap-
ter 1 of the Internal Revenue Code of 1986 is amended 
by inserting after section 83 the following new section: 
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‘‘SEC. 83A. QUALIFIED STOCK DISTRIBUTIONS TO EMPLOY-
EES. 
‘‘(a) IN GENERAL.—If an employee elects to have this 
section apply with respect to any qualified employee stock 
distribution, gross income shall not include— 
‘‘(1) so many shares of employer securities re-
ceived by an individual in a qualified employee stock 
distribution of such individual’s employer as does 
not exceed the maximum stock amount, 
‘‘(2) any gain on employer securities excluded 
from gross income under paragraph (1) if such em-
ployer security is held by such individual for not less 
than 10 years, and 
‘‘(3) in the case of any qualified disposition of 
an employer security which is described in para-
graph (2) (and which meets the holding requirement 
of such paragraph), any gain on so much stock ac-
quired during the 60-day period beginning on the 
date of such disposition as does not exceed the fair 
market value of the employer security so disposed 
(determined as of the time of disposition). 
‘‘(b) DEFINITIONS.—For purposes of this section— 
‘‘(1) EMPLOYER SECURITIES.—The term ‘em-
ployer securities’ has the meaning given such term 
in section 409(l), except that paragraph (3) thereof 
shall be applied by substituting ‘the date of the 
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qualified employee stock distribution’ for ‘the date of 
the acquisition by the tax credit employee stock own-
ership plan’. 
‘‘(2) QUALIFIED EMPLOYEE STOCK DISTRIBU-
TION.—The term ‘qualified employee stock distribu-
tion’ means a distribution by an employer of em-
ployer securities to employees (determined as of the 
date of the distribution) of such employer as com-
pensation for services, except that there may be dis-
regarded any employee who (as of the date of the 
distribution)— 
‘‘(A) has not attained age 18, 
‘‘(B) has not completed 12 months of serv-
ice with the employer, 
‘‘(C) is a nonresident alien, 
‘‘(D) is a citizen or resident of a foreign 
jurisdiction (including any individual who is 
also a citizen or resident of the United States) 
if the distribution to such individual is prohib-
ited under the laws of such foreign jurisdiction, 
‘‘(E) holds 10 percent or more of the out-
standing stock of the employer, or 
‘‘(F) is an employee whose compensation 
from the employer is subject to disclosure under 
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‘‘(B) 
APPLICABLE
PERCENTAGE.—For 
purposes of clause (i), the applicable percentage 
is, with respect to any calendar year following 
the calendar year in which such security was re-
ceived, the percentage determined in accordance 
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. 
‘‘(c) EMPLOYMENT TAXES.—Amounts excluded from 
gross income under subsection (a)(1) shall not be taken 
into account as wages for purposes of chapters 21, 22, 
23, 23A, and 24. 
‘‘(d) COORDINATION WITH SECTION 83.—In the case 
of a transfer of employer securities to which subsection 
(a)(1) applies— 
‘‘(1) IN GENERAL.—Section 83 shall not apply. 
‘‘(2) DEDUCTION BY EMPLOYER.—There shall 
be allowed as a deduction under section 162, to the 
person for whom were performed the services in con-
nection with which such securities were transferred, 
an amount equal to the fair market value of such se-
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curities (determined as of the time of such transfer). 
Such deduction shall be allowed for the taxable year 
which includes the date of such transfer. 
‘‘(e) RECAPTURE IF STOCK DISPOSED DURING RE-
QUIRED HOLDING PERIOD.—If an amount is excluded 
from gross income under subsection (a)(1) with respect 
to any employer security and the individual disposes of 
such security at any time during the 5-year period begin-
ning on the date that such individual received such secu-
rity— 
‘‘(1) the gross income of such individual for the 
taxable year which includes the date of such disposi-
tion shall be increased by the amount so excluded, 
and 
‘‘(2) the tax imposed by this chapter for such 
taxable year shall be increased by the sum of the 
amounts of tax which would have been imposed 
under subchapters A and B of chapters 21 and 22 
if subsection (c) had not applied with respect to such 
amount. 
For purposes of this title and the Social Security Act, any 
increase in tax under paragraph (2) shall be treated as 
imposed under the provision of chapter 21 or 22 with re-
spect to which such increase relates. 
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‘‘(f) BASIS
OF STOCK EQUAL
TO FAIR MARKET 
VALUE AT TIME OF TRANSFER.—Notwithstanding section 
1012, in the case of a transfer of employer securities to 
which subsection (a)(1) applies, the basis of such securi-
ties in the hands of the transferee immediately after such 
transfer shall be equal to the fair market value of such 
securities (determined as of the time of such transfer). 
‘‘(g) AGGREGATION RULE.—Two or more persons 
who are treated as a single employer under subsection (b), 
(c), (m), or (o) of section 414 shall be treated as a single 
employer for purposes of this section. 
‘‘(h) ELECTION.—The election under subsection (a) 
shall be made at such time and in such manner as the 
Secretary may prescribe. Once made, such election may 
be revoked only with the consent of the Secretary. 
‘‘(i) REGULATIONS.—The Secretary shall issue such 
regulations or other guidance as may be necessary or ap-
propriate to carry out this section, including regulations 
or other guidance which— 
‘‘(1) provide for the application of this section 
to stock options, 
‘‘(2) provide mechanisms by which to satisfy 
the requirements of this section in the event that an 
employee is inadvertently excluded from a distribu-
tion of employer securities (including a case where 
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a service provider is treated as not an employee by 
the employer, but is determined to be an employee), 
and 
‘‘(3) require such reporting under sections 6045 
and 6051 with respect to transfers of stock to which 
subsection (a) applies as the Secretary determines to 
be necessary or appropriate to carry out this sec-
tion.’’. 
(b) CLERICAL AMENDMENT.—The table of sections 
for such part is amended by inserting after the item relat-
ing to section 83 the following new item: 
‘‘Sec. 83A. Qualified stock distributions to employees.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to stock received by employees 
after the date of the enactment of this Act. 
Æ 
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