The NASPP Blog

A summary of the Senate version of the Tax Cuts and Jobs Act was released late yesterday and guess what? Yep, it includes the same provision changing the taxation of NQDC and stock compensation that the House bill had. It’s beginning to feel a little like the movie Groundhog Day. But hey, at least we aren’t talking about the CEO pay ratio anymore.

(Because it’s Friday and my fourth, no fifth, blog this week, I have a picture of a groundhog for you.)

Senate Version

The summary from the Senate version bill looks a lot like the same text that was in the JCT report of the House bill, so I did a document compare just for fun, because that is the sort of thing that is fun for me.

Turns out there are a few minor differences. Most significantly, the Senate version still exempts ISOs and ESPPs, but it sounds like the exemption might only apply if the shares acquired under these awards are sold in a qualifying disposition. This probably doesn’t impact ESPPs, since I think the purchase date would be considered the vest date in most cases, but it could impact how income on a disqualifying disposition of an ISO is determined.

The Senate version also includes the provision that modifies Section 162(m) to update the definition of covered employee and eliminate the exception for performance based compensation.

What’s the Score?

So, if you are keeping score, here’s where the two bills stand with respect to the provisions relating specifically to stock compensation:

• NQDC and Stock Compensation Taxed at Vest:  House 0, Senate 1 (out of the House bill, in the Senate bill)
• Changes to 162(m): House 1, Senate 1 (in both bills)
• Deferral of Tax on Stock Options and RSUs for Employees of Private Companies: House 1, Senate 0 (in the House bill, not in the Senate bill)

What’s Next?

Well, for sure, what’s next is the weekend, during which I don’t expect anything to happen on either of these bills. I’m guessing we all could use a little break. Go enjoy yourselves.

The Ways and Means Committee has approved the House bill; next stop for it is floor of the House for debate and a vote. This is expected to happen next week. The Senate bill starts committee markup next week and still has to be voted on by the Senate Finance committee before it can go to the full Senate for a vote.

Once passed by both the House and Senate, both bills will have to be reconciled so that they agree. There are major differences in the bills right now in areas that don’t directly impact stock compensation; the topics I have been writing about are just tiny parts of very broad legislation. But if the differences I’ve noted above aren’t reconciled during committee markup in the Senate or in the floor debates, they will have to be addressed during the reconciliation process.

I will keep you posted.

– Barbara