What's happening
This bill limits the tax deduction for stock options to the amount recognized as compensation under generally accepted accounting principles.
Why it matters
Narrows corporate tax deductions for stock options. By tying the deduction to the amount recognized as compensation under generally accepted accounting principles (GAAP), companies can no longer deduct more for stock options on their tax returns than they report as an expense to shareholders, closing a gap that has allowed for larger tax deductions than reported compensation costs.
May increase state tax liabilities for affected businesses. Companies that rely heavily on stock option compensation—especially tech firms and startups—could see higher New York State taxes since their deductible expenses for stock options may be lower under the new rules.
Promotes consistency and transparency. The change aligns tax reporting with financial reporting, making it harder for companies to present lower compensation expenses to investors while claiming higher deductions with tax authorities, thus reducing the potential for aggressive tax minimization strategies.
Potential impact on employee compensation practices. Limiting the deduction could make stock options a less attractive form of compensation from a corporate tax perspective, possibly influencing how companies structure pay packages for employees in New York.
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Who cares
Corporate taxpayers using stock options as compensation
The bill would add back federal stock-option deductions exceeding the compensation cost allowed under generally accepted accounting principles in the year the options were granted.
Corporate tax accountants
They would need to compare federal deductions under Internal Revenue Code section 83(h) with grant-year accounting costs for taxable years beginning on or after January 1, 2020.
Corporate shareholders
The compensation costs used in financial reporting to shareholders would serve as the benchmark for limiting the state tax deduction.
Headline styles
Allow Stock Option Deduction
Plain English, a few words. Used as the page title.
Sponsors
No co-sponsors yet.
History
- Referred to ways and means
- Referred to ways and means
Companion bill
The same bill in the other chamber. A bill becomes law when one version passes both houses and the governor signs it, so either number can carry it.
Limit Stock Option Deductions
In Senate Committee · Budget And Revenue · Sponsor Liz Krueger
Full text
1 pageUnderlined is new[Struck] is removedOfficial text on nysenate.gov ↗
STATE OF NEW YORK
7074
2019-2020 Regular Sessions
IN ASSEMBLY
April 4, 2019
Introduced by M. of A. GALEF -- read once and referred to the Committee on Ways and Means
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 25 to read as follows:
(25) 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, 2020.
EXPLANATION--Matter in italics (underscored) is new; matter in brackets
[ ] is old law to be omitted.
LBD06767-01-9
Reflowed for reading: line numbers and page breaks removed. Cite the official text.
Summaries, headlines and scores are AI-generated from the official bill text. How we score bills. Source: NYS Open Legislation.