Establishes a deduction for stock options.
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 21 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, 2013.
STATE OF NEW YORK ________________________________________________________________________ 3276 2013-2014 Regular Sessions IN SENATE January 31, 2013 ___________Introduced by Sen. KRUEGER -- read twice and ordered printed, and when printed to be committed to the Committee on Investigations and Govern- ment 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 ASSEM- BLY, DO ENACT AS FOLLOWS: Section 1. Paragraph (b) of subdivision 9 of section 208 of the tax law is amended by adding new subparagraph 21 to read as follows: (21) 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). S 2. This act shall take effect immediately and shall apply to taxable years beginning on and after January 1, 2013.EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets [ ] is old law to be omitted. LBD01846-01-3