I 
110TH CONGRESS 
2D SESSION 
H. R. 7292 
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 
NOVEMBER 19, 2008 
Mr. ROHRABACHER 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 139A the following new section: 
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‘‘SEC. 139B. QUALIFIED STOCK DISTRIBUTIONS TO EMPLOY-
EES. 
‘‘(a) IN GENERAL.—Gross income shall not include— 
‘‘(1) so many shares of any stock received 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 stock excluded from gross in-
come under paragraph (1) if such stock is held by 
such individual for not less than 10 years, and 
‘‘(3) in the case of any qualified disposition of 
stock which is described in paragraph (2) (and 
which meets the holding requirement of such para-
graph), any gain on so much stock acquired during 
the 60-day period beginning on the date of such dis-
position as does not exceed the fair market value of 
the stock so disposed (determined as of the time of 
disposition). 
‘‘(b) DEFINITIONS AND SPECIAL RULES.—For pur-
poses of this section— 
‘‘(1) QUALIFIED EMPLOYEE STOCK DISTRIBU-
TION.—The term ‘qualified employee stock distribu-
tion’ means a distribution by an employer of stock 
of such employer to all employees (determined as of 
the date of the distribution) of such employer as 
compensation for services. 
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‘‘(2) MAXIMUM
STOCK
AMOUNT.—The term 
‘maximum stock amount’ means, with respect to any 
distribution, the lowest number of shares of stock of 
the employer received by any employee of the em-
ployer in such distribution. 
‘‘(3) QUALIFIED DISPOSITION.— 
‘‘(A) IN
GENERAL.—The term ‘qualified 
disposition’ means, with respect to the disposi-
tion of any stock described in paragraph (2) 
during any calendar year, the disposition of a 
number of shares of such stock not in excess of 
the excess of— 
‘‘(i) the applicable percentage of the 
aggregate number of shares of such stock 
received during the calendar year that such 
stock was received, over 
‘‘(ii) the aggregate number of shares 
of such stock taken into account under this 
subparagraph for all prior calendar years. 
‘‘(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 stock was re-
ceived, the percentage determined in accordance 
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. 
‘‘(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) 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 stock and the individual disposes of such stock at 
any time during the 5-year period beginning on the date 
that such individual received such stock— 
‘‘(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 
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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. 
‘‘(e) REGULATIONS.—The Secretary shall issue such 
regulations as may be necessary or appropriate to carry 
out this section, including regulations which provide for 
the application of this section to stock options.’’. 
(b) CLERICAL AMENDMENT.—The table of section 
for such part is amended by inserting after the item relat-
ing to section 139A the following new item: 
‘‘Sec. 139B. Qualified stock distributions to employees.’’. 
(c) EFFECTIVE DATE.—The amendments made by 
this section shall apply to stock received by employees 
after December 31, 2008. 
Æ 
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