Startups Applaud Senate Committee for Changes to Tax Bill

After more than 600 startups, investors, and innovators from across the country wrote to lawmakers this week, warning about the devastating consequences of a proposed tax change that could hurt small companies competing for talent, Engine applauds the Senate Committee on Finance for recent modifications to the Senate Tax Plan.

The new bill language does not include changes to Section 409A of the Tax Code which would have taxed employee's stock options when they’re vested instead of when they’re exercised, effectively forcing employees to pay a tax on an asset before they actually get any income from it.

The new bill language also includes Sen. Heller and Sen. Warner's Empowering Employees Through Stock Ownership Act. S. 3152 promotes broad-based employee ownership by giving employees new flexibility in handling their tax obligations for up to seven years after exercising their stock options.  In order to be eligible, stock options must be extended to 80 percent of the workforce, and majority owners, corporate officers, and the highest-paid executives will not be eligible for the seven-year tax deferment.   

Startups rely on stock options and other stock-based incentives to offer competitive compensation in a market where large and incumbent firms can easily pay higher salaries. Allowing employees at all levels to share in the company’s risks and rewards, and many employees use profit from the proceeds of one company’s stock options to create new companies.

The changes to the Senate Tax Plan go a long way to promoting startups and job creation across the country. 

Read full letter here.