Senate Tax Bill Removes Stock Compensation Change: Startups Rejoice
Last week, the Senate pushed forward a tax reform proposal that would have taxed stock options as employees earned the right to receive them, rather than when those options are exercised. This would have resulted in employees being taxed before realizing the potential gains from their options. The change could have been devastating to employees of technology, life sciences and startup companies, as well as their investors. Startups typically use stock options to compensate employees through future growth of the business without having to spend additional cash.
This change could have severely limited the ability for these companies to compete, attract and retain the best talent to grow their business.
However, on November 14, 2017, the Senate revised its tax bill and removed this provision. As both the House and Senate tax bills now stand, the law remains unchanged and people with stock options will not be liable to pay tax before cashing in their stock options.