Options-Expense Bill Meets Opposition

A bill to force companies to treat employee stock options as an expense faces opposition in House and Senate tax committees, and from a countermeasure offered by a Senate committee chairman.

House Ways and Means Chairman William M. Thomas, a Bakersfield Republican who oversees tax legislation, opposes a bill sponsored by Michigan Democrat Sen. Carl Levin and Arizona Republican Sen. John McCain that would force firms to report options as corporate expenses and deduct them from income. So does Thomas’ counterpart in the Senate, Finance Committee Chairman Max Baucus of Montana.

“He’s inclined not to support the bill primarily because the bill, as structured right now, goes too far in the direction of potentially penalizing companies,” Baucus spokesman Michael Siegel said. Thomas’ spokeswoman made a similar comment.

A bill to promote wider distribution of stock options among rank-and-file workers, which is being drafted by Sen. Joseph I. Lieberman, a Connecticut Democrat, also faces opposition. His proposal would eliminate capital gains taxes on long-term holdings if a company gives half its option grants to workers making $90,000 or less.

Both the Levin-McCain and Lieberman bills emerge as Congress takes a closer look at stock option grants in the wake of the Enron Corp. collapse. Levin said his bill aims to promote fuller, clearer accounting; by not counting stock options as a current expense, Enron cut its taxes and boosted profit.

Expensing options is opposed by many companies, especially in the tech sector. Analysts say the practice would reduce many companies’ reported earnings.