Boehner, Houghton Offer Bill to Encourage Employee Stock Purchases

John Boehner (R-OH) and Amo Houghton have introduced the "Workplace Stock Option Act of 2002" (H.R. 5242). The bill would allow employees to put aside regular tax-deductible payroll deferrals into a special trust over up to five years for the purpose of purchasing shares of their employer. At the end of the deferral period (or earlier, if the company allows), the employee could purchase shares at the price of the stock at the beginning of the deferral period. When the employee actually receives the shares, there would be no tax due. If the stock is later sold for more than the exercise price, the employee would pay ordinary income tax on the price paid for the shares, plus capital gains tax on any increase in value. If the sale price is less, the employee would pay ordinary income tax on that amount only. The company would get a tax deduction equal to the exercise price for the shares when they are transferred to the employee, but would not be able to take a tax deduction on income the employee puts aside during the accumulation period.