Levin and McCain Plan to Introduce Bill to Require Option Expensing

Senators Carl Levin (D-MI) and John McCain (R-AZ) are introducing legislation that would prevent companies that do not record the present value cost of stock options as a charge to earnings from taking a tax deduction for the spread on the exercise of non-qualified options or disqualifying exercises of incentive stock options. Currently, the accounting charge only appears in financial footnotes. Senator Levin introduced similar legislation in 1998, but it was never seriously considered. In the wake of Enron accounting controversies, there is now more support for more disclosure of corporate costs in general. Still, the legislation will face stiff opposition from industry groups and practical questions about how to account for options.