On Tuesday, Engine joined over 80 startups and entrepreneurial ecosystem leaders in urging Congressional leadership to include the Empowering Employees through Stock Ownership (EESO) Act in any legislative vehicle Congress plans to pass before the end of 2016.
As the letter notes, the legislation “addresses a significant problem facing many private company employees and broader American entrepreneurship—the inability for many employees to own stock in their companies.” The tax code makes it very costly for employees at private companies to exercise their stock options. Under current law, an employee is required to pay a tax immediately upon exercise of their options. This is typically long before an employee is able to realize any economic value from those shares. The EESO Act attempts to remedy this by deferring an employee’s tax liability for up to 7 years, giving the employee more time to sell some or all of their stocks to help pay down their tax burden.
In September, the EESO Act passed the House with broad, bipartisan support and was approved unanimously by the Senate Finance Committee. This was due, in a large part, to efforts by the startup community in support of the bill. However, the bill still needs to pass the full Senate. With opportunities for legislative action during the 114th Congress dwindling, Tuesday’s coalition letter urges Congressional leadership to roll the EESO Act into any legislative package that will be considered before the end of the year.
The bill is a win-win for startups and their employees, and we hope that Congress will send it to the President’s desk for signature before the new year.
Read more on the issue:
Let’s Make It Easier for Startup Employees to Exercise Their Options
One Way Stock Options Are Hurting Businesses — and How to Fix It
