AMT Tax Relief Bill Introduced

August 3, 2001 ( - Congress is considering legislation giving tax relief to workers faced with huge tax bills after exercising stock option grants last year.

The new legislation, sponsored by Senator Joseph Lieberman, (D-Connecticut) would provide once-off relief for taxpayers who owe the alternative minimum tax because of unrealized paper stock profits.

At the height of the tech boom, many companies used stock options to attract key talent. The IRS considers the difference between what the workers paid for the stock and its market price to be income. It taxes that amount. Since many stocks have plummeted in value, their owners are now faced with huge tax bills based on the value of stocks that are now of little worth.

Once Time Only

While this problem isn’t new, the prevalence of equity awards last year, followed by plummeting new economy share prices, have made it particularly widespread.

The legislation, which is estimated to cost $1.3 billion over 10 years, aims to provide relief for those with options exercised only in 2000, by requiring that they be taxed at their fair market value as of April 15, 2001, instead of their value last year. Stock that was sold on or before April 15 would be taxed at the amount of gain that was actually realized.

House sponsors include Representatives Richard Neal (D – Massachusetts), Zoe Lofgren (D – California) and Tom Davis (R ? Virginia).

– Camilla Klein