What's happening
This bill limits tax deductions for stock options to the amount recognized as compensation under generally accepted accounting principles.
Why it matters
Closes a major tax loophole for corporations. by preventing companies from deducting more for stock options than what is recognized as employee compensation in their official financial statements, thus aligning tax deductions with reported expenses.
Could increase state tax revenue. by reducing the ability of companies to claim large tax breaks for stock options, which are often used as executive or employee compensation but may exceed reported expenses under current rules.
May impact how companies design compensation packages. , especially for executives and high-earning employees, since the tax advantage of granting stock options would be limited, possibly affecting recruitment and retention strategies.
Promotes transparency and comparability. in corporate financial reporting and taxation by tying allowable deductions to generally accepted accounting principles, making it harder for companies to use creative accounting for tax benefit.
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Who cares
Corporate taxpayers issuing stock options
The bill would require them to add back stock-option deductions exceeding the compensation cost recognized under generally accepted accounting principles in the year the options were granted.
Corporate tax and accounting teams
They would need to compare federal stock-option deductions with grant-year accounting costs for taxable years beginning on or after January 1, 2018.
New York State tax administrators
They would administer the new adjustment to corporate taxable income for deductions tied to stock options.
Headline styles
Deduct Stock Option Costs
Plain English, a few words. Used as the page title.
Sponsors
No co-sponsors yet.
History
- Referred to investigations and government operations
- Referred to investigations and government operations
Full text
1 pageUnderlined is new[Struck] is removedOfficial text on nysenate.gov ↗
STATE OF NEW YORK
4581
2017-2018 Regular Sessions
IN SENATE
February 21, 2017
Introduced by Sens. KRUEGER, PERKINS -- read twice and ordered printed, and when printed to be committed to the Committee on Investigations and Government Operations
AN ACT to amend the tax law, in relation to the deduction for stock options
The People of the State of New York, represented in Senate and Assembly, do enact as follows:
Section 1. Paragraph (b) of subdivision 9 of section 208 of the tax law is amended by adding a new subparagraph 22 to read as follows:
(22) in the case of property transferred to a person in connection with the performance of services, any deduction relating to stock options pursuant to the Internal Revenue Code section 83(h) for property described in subsection (a) of that section, in excess of the amount the taxpayer was allowed to treat as compensation cost with respect to that property in the year the stock option was granted under generally accepted accounting principles for the purpose of ascertaining income, profit, or loss in a report or statement to shareholders, partners or other proprietors (or to beneficiaries).
§ 2. This act shall take effect immediately and shall apply to taxable years beginning on and after January 1, 2018.
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD05942-01-7
Reflowed for reading: line numbers and page breaks removed. Cite the official text.
Sponsor's memo
Title of bill
An act to amend the tax law, in relation to the deduction for stock options
Purpose
This legislation would specify that the deduction can only be based on the price of the stock at the time of issuance of the option, not the price of the stock when sold.
Summary of provisions
The Tax Law is amended by adding a new paragraph 22 to paragraph (b) of subdivision 9 of section 208.
Justification
Currently, there is a loophole in the Federal Tax Code which allows for a corporation to take a tax deduction based on the price of a previously given stock option when it is sold, rather than the price when it was issued. Specifically, many corporations have given stock options at a set value to executives within their company instead of cash bonus payments. If the stock increased in value and the compensated executives sold their stocks at a higher price than the original value, the corporation would then be eligible for a tax deduction based on the higher price rather than the lower original price. As with many taxes, New York State is currently coupled with the Federal Tax Code on this issue. It is unclear how much New York State is currently losing because of the loophole.
The legislative solution to this loophole, is to specify at what term in the issuance of the stock options a corporation may take a compensation deduction.
Fiscal implications
The current tax loophole is estimated to cost the Federal Government approximately $2.5 billion annually which would increase New York State revenue by an undetermined amount. Additionally, the fiscal impact of this legislation may greatly increase in the future as the compensation packages on Wall Street rely less on cash bonuses and more on stock options.
Effective date
This act shall take effect immediately and shall apply to taxable years beginning on and after January 1, 2018.
Summaries, headlines and scores are AI-generated from the official bill text. How we score bills. Source: NYS Open Legislation.