Employee Stock Options: Tax Treatment and
Tax Issues
James M. Bickley
Specialist in Public Finance
June 15, 2012
Congressional Research Service
7-5700
www.crs.gov
RL31458
CRS Report for Congress
Pr
epared for Members and Committees of Congress
Employee Stock Options: Tax Treatment and Tax Issues
Summary
The practice of granting a company’s employees options to purchase the company’s stock has
become widespread among American businesses. Employee stock options have been praised as
innovative compensation plans that help align the interests of the employees with those of the
shareholders. They have also been condemned as schemes to enrich insiders and avoid company
taxes.
The tax code recognizes two general types of employee options, “qualified” and nonqualified.
Qualified (or “statutory”) options include “incentive stock options,” which are limited to
$100,000 a year for any one employee, and “employee stock purchase plans,” which are limited
to $25,000 a year for any employee. Employee stock purchase plans must be offered to all full-
time employees with at least two years of service; incentive stock options may be confined to
officers and highly paid employees. Qualified options are not taxed to the employee when granted
or exercised (under the regular tax); tax is imposed only when the stock is sold. If the stock is
held one year from purchase and two years from the granting of the option, the gain is taxed as
long-term capital gain. The employer is not allowed a deduction for these options. However, if the
stock is not held the required time, the employee is taxed at ordinary income tax rates and the
employer is allowed a deduction. The value of incentive stock options is included in minimum
taxable income for the alternative minimum tax in the year of exercise; consequently, some
taxpayers are liable for taxes on “phantom” gains from the exercise of incentive stock options. On
October 3, 2008, the Emergency Economic Stabilization Act of 2008 (P.L. 110-343) was enacted.
This law included provisions that provided abatement of any taxes still owed on “phantom” gains.
Nonqualified options may be granted in unlimited amounts; these are the options making the
news as creating large fortunes for officers and employees. They are taxed when exercised and all
restrictions on selling the stock have expired, based on the difference between the price paid for
the stock and its market value at exercise. The company is allowed a deduction for the same
amount in the year the employee includes it in income. They are subject to employment taxes
also. Although taxes are postponed on nonqualified options until they are exercised, the deduction
allowed the company is also postponed, so there is generally little if any tax advantage to these
options.
The following seven key laws and regulations concerning stock options are described: Section
162(m)—“Excessive Remuneration,” Sarbanes-Oxley Act: Stock Option Disclosure Reforms,
SEC’s 2003 Requirement of Approval of Compensation Plans, FASB Rule for Expensing Stock
Options, American Jobs Creation Act of 2004 (Section 409A), IRS Schedule M-3, and SEC’s
2006 Executive Compensation Disclosure Rules.
This report explains the “book-tax gap” as it relates to stock options and S. 2075 (
Ending
Excessive Corporate Deductions for Stock Options Act) introduced by Senator Carl Levin. U.S.
businesses are subject to a dual reporting system. One set of rules applies when they report
financial or “book” profits to the public. Another set of rules applies when they report taxable
income to the Internal Revenue Service. The “book-tax” gap is the excess of reported financial
accounting income over taxable income.
This report will be updated as issues develop and any new legislation is introduced.
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Employee Stock Options: Tax Treatment and Tax Issues
Contents
Background...................................................................................................................................... 1
Definition................................................................................................................................... 1
Advantages and Disadvantages of Stock Options ..................................................................... 2
Types of Employee Stock Options ............................................................................................ 3
Qualified Stock Options................................................................................................................... 3
Incentive Stock Options............................................................................................................. 4
Employee Stock Purchase Plans................................................................................................ 4
Current Tax Treatment............................................................................................................... 4
Alternative Minimum Tax ......................................................................................................... 5
Tax-Favored Treatment.............................................................................................................. 6
Payroll Taxes ............................................................................................................................. 7
Nonqualified Stock Options............................................................................................................. 8
Tax Treatment............................................................................................................................ 8
Are Nonqualified Options Tax Favored?................................................................................... 9
Key Laws and Regulations .............................................................................................................. 9
Section 162(m)—“Excessive Remuneration” ........................................................................... 9
Sarbanes-Oxley Act: Stock Option Disclosure Reforms ......................................................... 10
SEC’s 2003 Requirement of Approval of Compensation Plans .............................................. 10
FASB Rule for Expensing Stock Options................................................................................ 10
American Jobs Creation Act of 2004 (Section 409A) ............................................................. 12
IRS Schedule M-3 ................................................................................................................... 13
SEC’s 2006 Executive Compensation Disclosure Rules ......................................................... 13
Financial (or Book) Income Versus Tax Income............................................................................ 13
Proposed Legislation in 112th Congress......................................................................................... 15
Contacts
Author Contact Information........................................................................................................... 17
Congressional Research Service
Employee Stock Options: Tax Treatment and Tax Issues
Background
The practice of granting a company’s employees, officers, and directors options to purchase the
company’s stock has become widespread among American businesses.1 According to Information
Technology Associates, 15% to 20% of public companies offer stock options to employees as a
part of their compensation package, and over 10 million employees receive them. During the
technology company boom of the 1990s, they were especially important to start-up companies,
allowing them to avoid paying large cash salaries to attract talent.2
Employee stock options have been extolled as innovative compensation plans benefitting
companies, stockholders, and employees.3 They have been condemned as schemes to enrich
insiders at the expense of ordinary stockholders and as tax avoidance devices.4
This report explains the tax treatment of various types of employee stock options recognized by
the Internal Revenue Code, examines some of the issues that have arisen because of the real and
perceived tax benefits accorded employee stock options, and describes key laws and regulations
concerning stock options, and discusses the “book-tax” gap as it relates to stock options and S.
1375 (
Ending Excessive Corporate Deductions for Stock Options Act).
Definition
Employee stock options are contracts giving employees (including officers), and sometimes
directors and other service providers, the right to buy the company’s common stock at a specified
exercise price after a specified vesting period. The exercise price is typically the market price of
the stock when the option is granted (although it can be higher or lower), the vesting period is
usually two to four years, and the option is usually exercisable for a certain period, often five or
10 years. The value of the option when granted lies in the prospect that the market price of the
company’s stock will increase by the time the option is exercised. (If the price falls, the option
will simply not be exercised; the contract does not obligate the employee to buy the stock.)
Employee stock options typically cannot be transferred, and consequently have no market value.
To illustrate, suppose that Ceecorp, Inc., is a publicly held corporation whose stock is selling for
$10 a share on January 1, 2004. As a part of her compensation plan, Ceecorp’s chief financial
officer (CFO) was granted options on that date to buy 1,000 shares of stock for $10 a share any
time over the next 10 years, subject to certain conditions. One condition was that she had to work
for the company until she exercised her options. Another was that her right to the options vested
over a period of four years, one-quarter each year. This meant that on January 1, 2005, she
received an unrestricted right to buy 250 shares of stock for $10 a share, and so on each year
until, on January 1, 2008, all of the options were fully vested and she could buy 1,000 shares if
she chose.
1 The author of the first version of this report was Jack H. Taylor, consultant in business taxation.
2 John Doerr and Rick White, “Straight Talk About Stock Options,”
The Washington Post, March 12, 2002, p. A21.
3 Ibid.
4 Warren Buffett, “Stock Options and Common Sense,”
The Washington Post, April 9, 2002, p. A 19; Martin A.
Sullivan, “Stock Options Take $50 Billion Bite Out of Corporate Taxes,”
Tax Notes, March 18, 2002, p. 1,396.
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Employee Stock Options: Tax Treatment and Tax Issues
Suppose that Ceecorp’s stock had risen to $30 a share on January 1, 2005, when the CFO became
vested with the right to buy 250 shares, with no further restrictions on her ownership of the stock.
She could pay the company $2,500 for the 250 shares, which were at that point worth $7,500,
with an immediate gain of $5,000 (ignoring taxes for the moment) in either cash if she sold the
stock or property if she held on to it. She could similarly exercise the other options as they
became vested or wait for later stock price changes. The options would continue to be worth extra
compensation for her as long as Ceecorp’s stock was selling for more than $10 a share.
When she exercised her options, the company had to be prepared to sell her the stock at the
below-market exercise price. So on January 1, 2005, if she chose to buy 250 shares of Ceecorp
stock, the company had to either buy 250 shares of its own stock for $7,500 or issue 250 shares of
new or treasury stock that it could have sold for $7,500. When it sold these shares to the CFO for
$2,500, the economic reality was the same as if it had paid her $5,000 in cash: she received
additional compensation of $5,000 and Ceecorp was out $5,000 that it would have still had if she
had not exercised her options.
Advantages and Disadvantages of Stock Options
Paying for the services of employees or directors by the use of stock options has several
advantages for the companies. Start-up companies often use the method because it does not
involve the immediate cash outlays that paying salaries involves; in effect, a stock option is a
promise of a future payment, contingent on increases in the value of the company’s stock. It also
makes the employees’ pay dependent on the performance of the company’s stock, giving them
extra incentive to try to improve the company’s (or at least the stock’s) performance. Ownership
of company stock is thought by many to assure that the company’s employees, officers, and
directors share the interests of the company’s stockholders. Before June 15, 2005, accounting
rules did not require stock options to be deducted from income in the companies’ financial
statements; consequently, net profits reported to shareholders were larger than they would have
been if the same amounts were paid in cash.
Critics of the stock options, however, argue that the practice gives officers and directors a strong
incentive to inflate stock prices and that there is no real evidence that it does improve
performance. (Many of the leading users of stock options were among the companies suffering
substantial stock losses in recent years.)
Receiving pay in the form of stock options can be advantageous to employees as well. Stock
options can be worth far more than companies could afford to pay in direct compensation,
particularly successful start-up companies. Some types of stock options receive favorable income
tax treatment. Receiving pay in the form of stock options serves as a form of forced savings, since
the money cannot be spent until the restrictions expire.
Of course, it is a risky form of pay, since the company’s stock may go down instead of up. Some
employees may not want to make the outlay required to buy the stock, especially if the stock is
subject to restrictions and cannot be sold immediately. And some simply may not want to invest
their pay in their employer’s stock.
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Employee Stock Options: Tax Treatment and Tax Issues
Types of Employee Stock Options
There are a number of variations on the general idea of an employee stock option. Some
variations are due to the tax rules that govern them, and some are because of the intended use of
the options by the companies granting them. This report focuses on the tax treatment of the
options and the issues arising from the tax treatment; but one of the issues is whether the tax code
has kept up with the proliferation of ways options can be designed.
The Internal Revenue Code (IRC) recognizes two fundamental types of options. One is called
“statutory” or “qualified” options because they are accorded favorable tax treatment if they meet
the Code’s strict qualifications (IRC Section 421-424). Generally, the value of these options is not
taxed to the employee nor deducted by the employer. The second is “nonqualified” options, which
have no special tax criteria to meet, but are taxed to the employee as wage income when their
value can be unambiguously established (which IRS says is when they are no longer at risk of
forfeiture and can be freely transferred). They are deductible by the employer when the employee
includes them in income (IRC Section 83).
Some options have special features designed to do more than just compensate employees. Some,
such as the employee stock purchase plans discussed below, are granted at less than the market
price of the stock, to make it easier for recipients (particularly lower level employees) to buy
stock. Nonqualified options are often used to reward management, and some are only exercisable
if certain goals are met. “Premium” options are granted at a price higher than the current price of
the stock; “performance-vested” options are not exercisable until a specific stock price is reached.
“Indexed” options are repriced based on broad stock indices, to differentiate between the
company’s performance and the market’s performance. There are other variations.5
Options are not the only way to use a company’s stock to compensate employees. Direct grants of
stock are always possible, and can be hedged with restrictions similar to those governing the
exercise of options. “Stock appreciation rights” and “phantom stock” plans pay employees the
cash equivalent of the increases in the company’s stock without their actually owning any.6
These various plans have different tax consequences for companies and employees.
Qualified Stock Options
Two types of stock options qualify for the special tax treatment provided in IRC Section 421:
incentive stock options (ISO) and employee stock purchase plans. Both types require that the
recipient be an employee of the company (or its parent or subsidiary) from the time the option is
granted until at least three months before the option is exercised. The option may cover stock in
the company or its parent or subsidiary. Such options may not be transferrable except by bequest.
5 Shane A. Johnson and Yisong S. Tian, “The Value and Incentive Effects of Nontraditional Executive Stock Option
Plans,”
Journal of Financial Economics, vol. 57 (2000), pp. 3-34.
6 See Joint Committee on Taxation,
Present Law and Background Relating to Executive Compensation (JCX-39-06),
September 5, 2006, p. 42.
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Employee Stock Options: Tax Treatment and Tax Issues
Incentive Stock Options
Incentive stock options (IRC Section 422) must be granted in accordance with a written plan
approved by the shareholders. The plan must designate the number of shares to be subject to the
options and specify the classes of employees eligible to participate in the plan. The option price
must be no less than the market value of the stock at the time of the grant, and it must require
exercise within 10 years from the time it was granted. The market value of the stock for any
incentive stock options exercisable in any year is limited to $100,000 for any individual. This is
the limit on the amount that receives favorable tax treatment, not on the amount that may be
granted; options for stock exceeding $100,000 in market value are treated as nonqualifying
options. There are additional restrictions for options granted to persons owning more than 10% of
the outstanding stock.
Employee Stock Purchase Plans
An employee stock purchase plan (IRC Section 423) must also be a written plan approved by the
shareholders, but this type of plan must generally cover all full-time employees with at least two
years of service (or all except highly compensated employees). It must exclude any employee
who owns (or would own after exercising the options) 5% or more of the company’s stock. The
option price must be at least 85% of the fair market value of the stock either when the option is
granted or when it is exercised, whichever is less. The options must be exercised within a limited
time (no more than five years). The plan must not allow any employee to accrue rights to
purchase more than $25,000 in stock in any year.
Current Tax Treatment
Both types of qualified stock options receive some tax benefit under current law. The employee
recognizes no income (for regular tax purposes) when the options are granted or when they are
exercised. Taxes (under the regular tax) are not imposed until the stock purchased by the
employee is sold. If the stock is sold after it has been held for at least two years from the date the
option was granted
and one year from the date it was exercised, the difference between the
market price of the stock when the option was exercised and the price for which it was sold is
taxed at long-term capital gains rates. If the option price was less than 100% of the fair market
value of the stock when it was granted, the difference between the exercise price and the market
price (the discount) is taxed as ordinary income (when the stock is sold).
Companies generally receive no deduction for qualified stock options, so the tax advantage
accrues to the employee, not the employer. Companies that would not be taxable anyway, such as
start-up companies not yet profitable, would care little if at all about the tax deduction and would
be expected to use this method of compensation. Many companies that are taxable grant qualified
stock options, however, so these options must have some advantage that outweighs the tax cost.
In some cases, the companies no doubt find that rewarding their employees with qualified stock
options is worth the cost; in other cases, perhaps, the officers and employees who receive the
options exercise special influence over the companies’ compensation policies.
If the stock is not held for the required two years from the granting of the option and one year
from its exercise, special rules apply. The employee is taxed at ordinary income tax rates instead
of capital gains rates on the difference between the price paid for the stock and its market value
either when the option was exercised or when the stock was sold, whichever is less. The company
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Employee Stock Options: Tax Treatment and Tax Issues
is then allowed a deduction just as if the employee’s taxable gain were ordinary compensation
paid in the year the stock is sold.
To illustrate the tax treatment of incentive stock options, suppose that the Ceecorp’s grants to the
CFO described previously were under an incentive option plan approved by the shareholders. The
CFO could postpone taxation of her $5,000 gain by holding the stock until at least January 1,
2006 (one year after she bought it and two years after the options were granted). Assuming the
stock was still worth $30 a share, she could realize her gain at that point and be taxed at the lower
capital gains rate instead of her regular tax rate.
Alternative Minimum Tax
Imposing the alternative minimum tax (AMT) on qualified stock options reduces their tax
advantage; for persons paying the AMT, the tax treatment is similar to the regular tax treatment of
nonqualified options.7 Although the minimum tax exemptions limit the minimum tax to relatively
high-income taxpayers, it does impose some burden on the otherwise tax-favored option plans.
The minimum tax can make the receipt of qualified stock options an extremely complex problem.
It is imposed in the year the options are exercised (and the stock is transferred without
restrictions) at the AMT rates of 26% or 28%, and the basis of the stock then becomes, for AMT
purposes, the market price of the stock. When the stock is sold, it will have two bases, one for the
AMT and one for the regular tax. Double taxation will not result, because an alternative minimum
tax credit will be available (if the employee is not again subject to the minimum tax) or an
adjustment of minimum taxable income will be made (if he owes minimum tax again that year).
Since taxpayers often will not know if they are subject to the minimum tax until the tax year is
over, tax planning can be very difficult.
Under certain circumstances, it is possible for an individual to owe the AMT on the value of
incentive stock options at the time that these options are exercised. But in the same year, a
subsequent decline in the value of the stock after exercise would cause the individual to owe
income taxes under the AMT on “phantom” gains. There was a credit for prior year minimum
taxes in excess of regular taxes that accrues when the taxpayer returns to the regular tax system,
but this credit was not refundable.8
On December 20, 2006, this “unfair” situation was solved for most taxpayers by passage of the
Tax Relief Act and Health Care Act of 2006 (P.L. 109-432), which made the credit for prior years’
minimum tax liability refundable. According to Sections 402 and 403 of this act,
an individual’s minimum tax credit allowable for any taxable year beginning before January
1, 2013, is not less than the “AMT refundable credit amount”. The “AMT refundable credit
amount” is the greater of (1) the lesser of $5,000 or the long-term unused minimum tax
credit, or (2) 20 percent of the long-term unused minimum tax credit. The long-term unused
minimum tax credit for any taxable year means the portion of the minimum tax credit
attributable to the adjusted net minimum tax for taxable years before the 3rd taxable year
7 For a description of the alternative minimum tax, see CRS Report RL30149,
The Alternative Minimum Tax for
Individuals, by Steven Maguire.
8 For an analysis of this issue, see archived CRS Report RS20874,
Taxes and Incentive Stock Options, by Jane G.
Gravelle.
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Employee Stock Options: Tax Treatment and Tax Issues
immediately preceding the taxable year (assuming the credits are used on a first-in, first-out
basis).9
On December 26, 2007, the Tax Increase Prevention Act of 2007 (P.L. 110-166) was enacted.
This law provided a one-year extension of AMT relief for non-refundable personal credits to
offset AMT liability for tax year 2007 and increased the individual AMT exemption amount for
taxable years beginning in 2007 to $66,250, in the case of married individuals filing a joint return
and surviving spouses, and $44,350 in the case of other unmarried individuals. Some taxpayers
were still liable for taxes on “phantom” gains from the exercise on incentive stock options.
Consequently, the enactment on October 3, 2008, of the Emergency Economic Stabilization Act
of 2008 (P.L. 110-343) included additional relief for taxpayers with “phantom” gains. This act
provided three changes:
First, the Act requires the abatement of any tax liability attributable to the requirement to
include amounts in alternative minimum taxable income due to the exercise of the ISO for
taxable years ending prior to January 1, 2008, as well as related penalties and interest, to the
extent that the liability remains unpaid as of October 3, 2008. Second, the Act accelerates the
allowance of the long-term unused minimum tax credit allowing 50% of such amount to be
used to reduce the tax liability or to create an overpayment for the tax years beginning before
2013. Third, the Act allows taxpayers a minimum tax credit for the 2008 and 2009 tax years
that is refundable if not otherwise allowable in reducing current tax liability, equal to 50% or
more of the related interest and penalties paid by the taxpayer prior to October 3, 2008,
attributable to the exercise of incentive stock options. Thus, provided that an ISO AMT
liability has resulted in a long-term unused minimum tax credit, the taxpayer may claim a
total credit of 100% of the tax, penalties, and interest paid prior to October 3, 2008,
attributable to the exercise of incentive stock options that resulted in those liabilities, over a
two-year period.10
Tax-Favored Treatment
Continuing the tax advantages that qualified stock options receive is not often raised as an issue
in their tax treatment. It is often argued that giving favorable tax treatment to a limited amount of
compensation in the form of options helps spread the use of options to rank-and-file workers.
(Nonqualified options, which are not tax favored, are more likely to go to officers and highly paid
employees.) Employee stock ownership plans are explicitly promoted as a means for workers to
become owners of their companies. In addition, the cost to the government is at least partially
offset by the lack of a tax deduction at the company level. There may be a corporate governance
issue concerning the reason that some publicly held companies are willing to incur an
unnecessary tax cost for the benefit of officers and employees. (The company could offer
nonqualified stock options, which are deductible; in fact, many companies do offer both incentive
and nonqualified options to the same employees.)
9 Joint Committee on Taxation,
Technical Explanation of H.R. 6408, the Tax Relief and Health Care Act of 2006, as
Introduced in the House on December 7, 2006, December 7, 2006, pp. 83-84.
10 Internal Revenue Service, “AMT and ISO Emergency Economic Stabilization Act of 2008 Relief,” available at
http://www.irs.gov/individuals/article/0,,id=200951,00.html.
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Employee Stock Options: Tax Treatment and Tax Issues
Payroll Taxes
Before 1995, qualified stock options were not considered wages for Federal Insurance
Contribution Act (FICA) and Federal Unemployment Tax Act (FUTA) purposes. The Internal
Revenue Service (IRS) issued a ruling in 1971 to this effect (Revenue Ruling 71-52). However,
the Tax Court later ruled that they were wages for calculating the research tax credit,11 and IRS
acquiesced in that decision in 1997. Subsequently, IRS said that it would be required to impose
employment taxes on the options also, and it made several attempts to impose the taxes in
specific cases.12
In November 2001, IRS announced a proposed regulation that would subject the value of
qualified stock options (the difference between the exercise price and the market price) to FICA
and FUTA taxes in the year the options are exercised. This new rule would have been effective
January 1, 2003, and until that time IRS would not attempt to collect any taxes on the options. No
change in income tax treatment was proposed, and income tax withholding would not have been
required.13
The proposed regulation received a negative reaction in the public comments that IRS requested.
Companies argued that the additional tax cost and the paperwork burden of a new accounting
requirement would discourage the granting of options and make them less attractive to
employees. The critics argued that Congress explicitly excluded the value of an exercised
qualified stock option from income, and that something cannot be “wages” if it is not also
“income.”14
On June 25, 2002, the Treasury Department and the IRS announced an indefinite extension of
their administrative moratorium on qualified stock options. Pam Olson, acting Assistant Secretary
for Tax Policy, stated that
Given the significant administrative changes that would be required of employers to
implement the proposed withholding, it is clear that a delay in the effective date is necessary
to provide employers with adequate time to make the required changes. In addition, Treasury
and IRS need additional time to consider the many comments we received on the proposed
regulations and to decide on an appropriate course of action. Consequently, employers will
not be required to implement the changes for at least two years after the regulations have
been issued in final form.15
On October 22, 2004, P.L. 108-357 (American Jobs Creation Act) was signed by the President,
and this law included a provision (Title 11, Subtitle F), which excluded qualified stock options
from FICA and FUTA taxes.
11 Sun Microsystems, Inc., v. Commissioner, T. C. Memo. 1995-69.
12 Sheryl Stratton, “Hearing on Stock Option Regs Should Be Livelier Than Most,”
Tax Notes, May 13, 2002, p. 968.
13 Proposed Regulation REG-142686-01,
Internal Revenue Bulletin 2001-49, p. 561.
14 See Stratton, op. cit.
15 U.S. Department of the Treasury, “Treasury and IRS Extend FICA and FUTA Tax Moratorium for Statutory Stock
Options,” press release, June 25, 2002, p. 1.
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Employee Stock Options: Tax Treatment and Tax Issues
Nonqualified Stock Options
Employee options that do not qualify for tax-favored treatment are by far the most important (at
least by value). Because there are no statutory limits on the amount of these options that can be
offered, these are the options used to compensate corporate officers and highly paid employees.
Unlike qualified options, these options can be offered to anyone “providing services” to the
company, not just employees. Therefore, they can also be given to those who serve on the
company’s board of directors (or even to independent contractors). When news reports and policy
analysts mention options, without other qualifications, they normally mean nonqualified options.
Tax Treatment
Nonqualified options fall under the general rules governing the transfer of property other than
money in return for services (IRC Section 83). Basically, the rule is that the recipient receives
income equal to the fair market value of the property (less any amount paid for it) when he
receives an unrestricted right to the property and its fair market value can be reasonably
ascertained. Stock options without a “readily ascertainable market value” are specifically
excepted by Section 83(e)(3). (Qualified stock options are also excluded.)
In the case of nonqualified options, IRS has ruled that options that are not tradeable (as is almost
always true of these options) have no “readily ascertainable market value.” Therefore, their fair
market value cannot be established until they are exercised and any restrictions on the disposition
of the stock have been lifted. At that time, the value of the options is equal to the difference
between the exercise price and the stock’s current market price.16 (There is a provision in Section
83 (b) allowing the recipient of the options to elect to include their value in income in the year
they are exercised, valuing them as if the stock were not restricted. However, no future deduction
is allowed if the stock is later forfeited.)
Nonqualified stock options exercised by employees are subject to FICA and FUTA taxes and
income tax withholding, just as cash wages are.
The company granting the options is allowed to deduct from income the same value of the
options that the recipient includes in income, in the same year it is taxable to the recipient
(Section 83(h)).
If the options granted by Ceecorp to its CFO in our previous example were nonqualified options,
there would be three notable differences from the qualified options assumed before. One is that
she would have been immediately taxable on the difference between what she paid for the stock
and what it was worth in the year she acquired it, so she would have owed income and FICA
taxes on $5,000 in 2005. The second was that Ceecorp could deduct the $5,000 as employee
compensation on its own tax return (and would also owe FICA and FUTA taxes on it). And
probably most important in the real world (although not in our example), there would have been
no limit on the value of the options granted, so a highly compensated officer like a chief financial
officer could receive potentially large amounts of additional compensation.
16 IR Reg. 1.83-7.
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Are Nonqualified Options Tax Favored?
Nonqualified options are not taxed to the recipient when they are granted or when they become
vested, so receiving compensation in this form postpones the payment of taxes from when they
would have been due on an equivalent amount of cash wages. However, the reason for not taxing
them is the uncertainty of their actual value; the tax rules follow the practical path of postponing
tax until their value is realized, as is the case with capital gains. In addition, the company’s
deduction of the compensation is also postponed, being allowed only in the same year that the
recipient reports the income realized. Since most of these options go to highly compensated
individuals, whose marginal tax rates would often be higher than the company’s, the government
probably suffers little if any revenue loss. So it could be argued that the government should be
indifferent to the issue.
Key Laws and Regulations17
Seven key laws and regulations relevant to employee stock options warrant discussion. Six of
these laws or regulations date from 2002.
Section 162(m)—“Excessive Remuneration”
The Omnibus Budget Reconciliation Act of 1993 established IRC Section 162(m), titled “Certain
Excessive Employee Remuneration,” which applied to the CEO and the four highest compensated
officers (other than the CEO) of a publicly held corporation. For each of these “covered
employees,” the publicly held corporation could only deduct, as an expense, the first $1 million of
applicable remuneration. The reason for this change was that “the committee believes that
excessive compensation will be reduced if the deduction for compensation ... paid to the top
executives of publicly held corporations is limited to $1 million per year.”18 Exceptions to this $1
million in applicable remuneration include (1) “remuneration payable on commission basis” and
(2) “other performance-based compensation.” In order to qualify for this second exception, four
conditions must be met:
• It is paid solely on account of the attainment of one or more performance goals.
• The performance goals are determined by a compensation committee of the
board of directors of the taxpayer, which is comprised solely of two or more
outside directors.
• The material terms under which the remuneration is to be paid, including the
performance goals, are disclosed to shareholders and approved by a majority of
the vote in a separate shareholder vote before the payment of such remuneration.
• Before any payment of such remuneration, the compensation committee certifies
that the performance goals and any other material terms were in fact satisfied.19
17 Gary Shorter of CRS contributed explanations about the Sarbanes-Oxley Act and SEC rules to this section of the
report.
18 H.Rept. 103-111, p. 646.
19 IRC Sec. 162(m), (4)(C).
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Employee Stock Options: Tax Treatment and Tax Issues
Economic theory suggests that the $1 million cap on deductible compensation would increase the
relative importance of performance-related compensation including stock options.20 In retrospect,
the provision appears to have made stock options relatively less expensive than base salaries,
bonuses, or stock grants, which were subject to the cap.
The SEC amended the rules for covered employees under Section 162(m). Under the new rules,
covered executives are the principal executive officer (PEO), the principal financial officer
(PFO), and the three most highly compensated executives other than the PEO and PFO.21
Sarbanes-Oxley Act: Stock Option Disclosure Reforms
Enacted in the wake of widespread accounting scandals at firms like Enron and WorldCom, the
Sarbanes-Oxley Act of 2002 (SOX) contained a host of corporate governance and accounting
regulatory reforms. Prior to SOX, firm insiders were required to disclose grants of stock options
within 45 days of the end of a company’s fiscal year. SOX requires that all insider transactions in
a company’s stock, including option grants, be disclosed within two business days. The
requirement went into effect on August 29, 2002.
SEC’s 2003 Requirement of Approval of Compensation Plans
In 2003, the SEC approved changes to the listing standards of the New York Stock Exchange and
the Nasdaq Stock Market that require shareholder approval of almost all equity-based
compensation plans. Firms must disclose the material terms of their stock option plans, prior to
obtaining shareholder approval for them. The required disclosures include the terms on which
options will be granted, including whether the plan permits options to be granted with an exercise
price that is below market value on the date of the grant.
FASB Rule for Expensing Stock Options
On March 31, 2004, the Financial Accounting Standards Board (FASB) issued a new exposure
draft that would treat all forms of share-based payments to employees, including employee stock
options, the same as other forms of compensation by recognizing the related cost in the income
statement. The expense of the award generally would be measured at fair value at the grant date.22
On July 1, 2004, the Council of Institutional Investors (a group of 140 pension funds), voiced its
concern about reports that FASB was considering delaying implementation of the planned
standard on stock option compensation.23 On July 14, 2004, the National Association of
20 A National Bureau of Economic Research (NBER) study found that Section 162(m) had no significant effects on
overall executive compensation because of the exemption from the cap of performance-based compensation, the ability
to defer compensation, and the cap only applying to salaries of five executives. For these results, see Nancy L. Rose
and Catherine Wolfram, “Regulating Executive Pay: Using the Tax Code to Influence CEO Compensation,” NBER
Working Paper 7842, Cambridge, Mass.: National Bureau of Economic Research, August 2000, 47 p.
21“Covered Employees Under Section 162(m)(3),” Notice 2007-49,
Internal Revenue Service Bulletin: 2007-25, June
18, 2007.
22 Alison Bennett, “Baker Criticizes Stock Options Proposal; Announces Subcommittee Hearing in April,”
Daily Tax
Report, no. 62, April 1, 2004, p, GG-2.
23 Sarah Teslik, Executive Director of Council of Institutional Investors, “Letter to Director of Financial Accounting
Standards Board,” July 1, 2004.
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Manufacturers, the Business Roundtable, and the U.S. Chamber of Commerce issued a joint news
release stating that FASB should engage in field testing of multiple stock option valuation models
and delay finalizing any standard until such testing has occurred.24 Alan Greenspan, Chairman of
the Board of the Federal Reserve, endorsed FASB requiring the expensing of stock options. He
stated: “Not expensing stock options may make individual firms look more profitable than they
are.”25
On December 16, 2004, the FASB issued new rules requiring companies to subtract the expense
of options from their earnings.26 According to press reports, these new rules would dramatically
reduce the earnings of many companies that currently show this expense in footnotes.27 Initially
these new rules would apply to financial statements beginning after June 15, 2005, for large
publicly traded companies (or December 15, 2005, for small businesses) or the third quarter of
2005 for those large companies on a fiscal calendar year.28 But, effective April 21, 2005, the
Securities and Exchange Commission (SEC) postponed the stock option expensing standard until
the beginning of companies’ next fiscal year. Thus, companies with fiscal years on a calendar year
basis will not have to comply with the expensing standard until the first quarter of 2006. The SEC
gave three justifications for this postponement: reducing compliance costs, relieving companies
from having to change their accounting systems in the middle of the fiscal year, and allowing
auditors to conduct more consistent review procedures.29 On March 29, 2005, the SEC stated that
public companies may choose from a number of valuation methods to estimate the fair market
value of their stock options.30
In response to the FASB requirement that the cost of stock options be included as an expense on
financial statements, a survey found that some companies were reducing the amount of their stock
option benefits or eliminating their stock option plans.31 Another study found that 439 companies
had pushed up vesting dates on their stock options to beat the December 31, 2005, deadline;
consequently, these companies eliminated more than $4 billion in expenses, which would
otherwise have shown up on income statements starting in 2006.32
The Securities and Exchange Commission continued to refine appropriate methodologies for the
valuation of stock options.33 On December 5, 2005, Alison Spivey, associate chief accountant
24 Kurt Ritterpusch, “Options Bill Jurisdictional Issues Remain But Blunt Hopes to See Bill on Floor Soon,”
Daily Tax
Report, no. 135, July 15, 2004, p. G-4.
25 Alan Greenspan, Chairman of the Board of Governors of the Federal Reserve System, “Letter Responding to
Senators Levin, McCain on Stock Options Accounting,” October 1, 2004.
26 Financial Accounting Standards Board, “FASB Issues Final Statement on Accounting for Share-Based Payment,”
FASB News Release, December 16, 2004.
27 “FASB to Require Expensing of Options Starting Next Year,”
The Wall Street Journal, vol. 224, no. 119, December
17, 2004, p. C3.
28 Ibid.
29 Securities and Exchange Commission, “Amendment to Rule 4-01(a) of Regulation S-X Regarding the Compliance
Date for Statement of Financial Accounting Standards No. 123 (Revised 2004), Share-Based Payment,” 70
Federal
Register 20717, April 21, 2005.
30 17 C.F.R. PART 211.
31 Andrew Blackman, “Firms Reconsider Stock Discounts for Employees,”
The Wall Street Journal, vol. 246, no. 46,
September 6, 2005, p. D2.
32 Ben White, “Pushing Fast-Forward on Options,”
The Washington Post, December 19, 2005, p. D1.
33 Steven Marcy, “SEC Continues to Refine Determination of Valuation, Volatility Assumption in Plans,”
Daily Tax
Report, December 14, 2005, p. G9.
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Employee Stock Options: Tax Treatment and Tax Issues
with the SEC’s Office of Chief Accountant, issued a warning regarding volatility assumptions for
valuing stock options.34 Some large U.S. companies reportedly reduced the cost of their stock
options by making subjective changes in their methods used in valuing their stock options.35 In
estimating the value of their stock options, companies have to make assumptions about numerous
factors including volatility or the magnitude and speed of share-price swings over the life of their
options.36 The cost of an option rises as its volatility increases. One study found that the volatility
assumptions for 50 large companies with sales in excess of $20 billion declined by an average of
13% from 2003 to 2005.37 On October 17, 2007, the SEC approved the Zions Bancorporation’s
auction process to value employee stock options. The SEC stated,
Your Submissions represent significant progress towards the identification of a suitable
market-based approach to valuing employee share-based payment awards. We remain
committed to supporting the development of a variety of competing market-based objective
measurement of the fair value of employee stock options, of which yours is an example. Of
course, future auctions using the approach outlined in your Submissions must be evaluated
by a company and its external auditors based upon the particular facts and circumstances to
ensure that the result produces a reasonable estimate of fair value in accordance with
Statement 123R.38
American Jobs Creation Act of 2004 (Section 409A)
On October 22, 2004, the American Jobs Creation Act of 2004 (P.L. 108-357 ) was passed. This
law included new statutory requirements under IRC Section 409A concerning deferred
compensation, that is, the delay of the receipt of compensation and taxes on compensation to a
future tax year. This section was included “in response to perceived abuses by executive
employees in the recent wave of corporate scandals.”39 This section applies to amounts deferred
in tax years that begin after December 31, 2004, and includes stock appreciation rights if the
exercise price is less than the fair market value of the underlying stock on the date the stock
appreciation rights are granted.40 Section 409A generally provides that
amounts deferred under a nonqualified deferred compensation plan for all taxable years are
currently includible in gross income to the extent not subject to substantial risk of forfeiture
and not previously included in gross income, unless certain requirements are met.41
Thus, stock options, subject to 409 A, were included in income when they vested rather than
when they were exercised. Consequently, IRC Section 409A reduced the tax advantage of
stock options, and presumably reduced the use of stock options.
34 Ibid.
35 Richard Waters, “Options Rule Used to Lift Earnings,”
Financial Times, April 24, 2006, p. 18.
36 Steven D. Jones, “Option Expensing Leaves Room for Tallying the Volatility Factor,”
The Wall Street Journal, May
2, 2006, p. C3.
37 Ibid.
38 Conrad Hewitt, Chief Accountant, SEC,
Letter to James G. Livingston, Vice President of Zions Bancorporation,
October 17, 2007.
39 Joni L. Andrioff, “Deferred Compensation Revolution—Tough Transition to a Statutory System,”
Taxes: The Tax
Magazine, vol. 83, no. 5, May 2005, p. 65.
40 Ibid., p. 66.
41 Internal Revenue Service, “Interim Guidance on the Application of Section 409A to Accelerated Payments to Satisfy
Federal Conflict of Interest Requirements,”
Internal Revenue Bulletin, 2006-29, July 17, 2006, p. 1.
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Employee Stock Options: Tax Treatment and Tax Issues
IRS Schedule M-3
Effective December 2004, the new Schedule M-3 book-tax reconciliation replaced the old
Schedule M-1 for most publicly traded and many privately held corporations with assets of $10
million or more.42 Schedule M-3 provided tax professionals with a wealth of new information to
understand the book-tax gap. For example, specific differences between book and tax income
could be characterized as temporary or permanent.43
SEC’s 2006 Executive Compensation Disclosure Rules
In July 2006, the SEC issued new rules designed to enhance the transparency of proxy
compensation disclosures for CEOs, chief financial officers (CFOs), the other three highest paid
executive officers, and directors, the first such major reform since 1992.44 These rules include
provisions that require companies to disclose whether they are timing options grants to make
them more lucrative to executives and other employees.45 The rules require companies to present,
in tabular form, the stock price on the grant date, the grant date under accounting rules, the
market price on the grant date if it is greater than the exercise price, and the date the
compensation committee or full board granted the award if different than the grant date for
accounting purposes. In a new section of the proxy,
Compensation Discussion and Analysis,
management must discuss material information such as the reasons a company selects particular
grant dates for awards and the methods a company uses to set the terms of awards.
Financial (or Book) Income Versus Tax Income
U.S. businesses are subject to a dual reporting system. One set of rules applies when they report
financial or “book” profits to the public. Another set of rules applies when they report taxable
income to the Internal Revenue Service.46 Under this dual reporting system businesses have an
incentive to maximize their reported financial or book income and minimize their reported
taxable income. This accounting gamesmanship results in a “book-tax” gap, which is the excess
of reported financial accounting income over taxable income.47 Since 1993, the increased use of
stock options to compensate top corporate executives increased the book-tax gap.48 One press
report stated the following:
In 2004, nonqualified employee stock options accounted for $40.4 billion of the total
difference between financial and tax expenses. Incentive stock options accounted for another
42 Charles Boynton, Portia DeFilippes;, and Ellen Legel, “A First Look at 2004 Schedule M-3 Reporting by Large
Corporations,”
Tax Notes, September 11, 2006, p. 944.
43 Ibid., p. 952.
44 See CRS Report RS22583,
Executive Compensation: SEC Regulations and Congressional Proposals, by Michael V.
Seitzinger.
45 These new rules are stated in 17 CFR Parts 228, 229, et al., pp. 53,158-53,166.
46 Joint Committee on Taxation,
Present Law and Background Relating to the Interaction of Federal Income Tax Rules
and Financial Accounting Rules (JCX-13-12), February 7, 2012. Available at [www.jct.gov].
47 Daniel L. Slaton, “Solving Stock Option Compensation: Why Book-Tax Conformity May Not Be the Answer,”
Houston Business and Tax Law Journal, vol. 9, part 1, 2009, pp. 177-179.
48 In 1993, Section 162(m) of the IRC was added, which is explained in the next section of this report.
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Employee Stock Options: Tax Treatment and Tax Issues
$6.3 billion, and other equity-based compensation for $2.8 billion. In total, those three forms
of equity-based compensation reduced tax net income by nearly $50 billion while having
minimal impact on book income. Stock options and other equity-based compensation
accounted for roughly 30 percent of the permanent reduction in tax income from book
income.49
Financial accounting provides investors and regulators with information about a company’s
financial condition and uses estimates to measure profits and expenses when earned. Financial
accounting emphasizes consistency over time for a company’s reports, thus a company has
discretion in preparing its reports.50 Since 1934, the Securities and Exchange Commission (SEC)
has had authority to set financial reporting standards but has generally delegated this authority to
the private sector.51 Since 1973, the Financial Accounting Standard Board (FASB) has been
delegated authority by the SEC to establish Generally Accepted Accounting Principles (GAAP).52
In contrast, tax accounting emphasizes the actual receipt of payments and proceeds, and taxable
income is defined as gross income minus all allowable deductions and exemptions.53 The Internal
Revenue Service (IRS) has the responsibility for raising revenue; consequently, “much of the
Internal Revenue Code requires uniformity in accounting for income and expenses across
firms.”54
Originally, the GAAP accounting rules for stock options were of very limited scope. Because
employee options were normally priced equal to the market price of the company’s stock when
they were granted, they were said to have no value. The fact that they were intended to have value
and therefore serve as compensation was not taken into account. As they became more popular,
however, the accounting standards were modified to require some recognition of their effect on a
company’s income. Rule FAS 123 required companies to estimate the value of the options when
they are granted (using an option pricing model) and show that amount, called the “fair value,” as
a cost over the years until the options are vested. In their published financial statements, the
companies could either treat the estimated value of the options as a cost in calculating net
income,55 or they could use the traditional valuing of the options (i.e., zero) in calculating net
income and show the effect of deducting the estimated value in a footnote. Most companies chose
to use the footnote method, but in the early 2000s many large corporations shifted to the
deduction method. On December 16, 2004, FASB issued new rules requiring companies to
subtract the expense of stock options from their earnings on their financial statements.56
In the very simple example used previously, Ceecorp and its CFO, the traditional valuation of the
options when granted would be: the stock is selling for $10 a share, the options allow the CFO to
buy it at $10 a share, so the options’ value is zero. Ceecorp, like almost all public corporations,
would probably calculate its net profit on its financial statement using this valuation. Under FAS
49 Joann M. Weiner, “Closing the Other Tax Gap: The Book-Tax Income Gap,”
Tax Notes, May 28, 2007, p. 856.
50 Daniel L. Slaton, p. 179.
51 Ibid., p. 180.
52 Ibid., pp. 180-181.
53 Ibid., p. 179.
54 Ibid., p. 180.
55 This method is commonly referred to as “expensing.”
56 Laws and regulations pertaining to this discussion of the “book-tax” gap are explained in more detail in the
subsequent section of this report.
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Employee Stock Options: Tax Treatment and Tax Issues
123, however, it would also use an estimating model to determine a market value. The model
would estimate the likelihood that the stock would go up in value over the life of the option and
take other variables into account and establish what the option might be worth on the open market
when granted (if it could be marketed). So, Ceecorp might estimate that the “fair value” of the
options when granted was $16 each, for a total value of $16,000, and report in a footnote to its
financial statement an additional compensation cost of $4,000 each year for the four years over
which the options vested. It would not account for the actual cost of the options when exercised
on its income statement. But, new FASB rules require Ceecorp to report the “fair value” of the
options on its financial statements.
Several bills were introduced in prior Congresses to restrict the tax deduction for options because
of the differences with the accounting treatment. The bills attempted to change the companies’
accounting practices, to make the cost of stock options more apparent to stockholders and
investors; but the device chosen in the bills is to restrict the tax deduction allowed to the amount
“treated as an expense” on the companies’ books of account. Without further changes in either the
accounting rules or the tax law, however, this approach did not in fact conform the tax and book
treatment. The book expense was based on the estimated value of the options when granted and is
charged off over the vesting period of the options. The tax deduction, in contrast, was allowed
only when the options are exercised, and would, under this approach, be limited to the smaller of
the estimated or actual values. In addition, the amount deducted by the company would no longer
necessarily equal the amount taxed to the individual.
Proposed Legislation in 112th Congress
On July 14, 2011, Senator Carl Levin introduced S. 1375, the
Ending Excessive Corporate
Deductions for Stock Options Act.57 In a press release, Senator Levin stated that
Current stock option accounting and tax rules are out of kilter, leading corporations to report
inconsistent stock option expenses on their tax returns versus their financial books, and often
produce huge tax windfall for corporations that pay their executives with large stock option
grants. This windfall produces excess corporate tax deductions totaling as much at $60
billion in a single year, which costs the U.S. Treasury billions of dollars a year in lost tax
revenue. In effect, it’s a taxpayer subsidy for the pay of corporate executives. It’s a tax break
we can no longer afford and ought to end.58
Senator Levin asserted that his bill would reduce the deficit by $25 billion over 10 years.59
In the press release, a summary of S. 1375 indicated that it would
• require the corporate tax deduction for stock option compensation not to exceed
the stock option book expense shown on a corporation’s financial statement;
57 Senator Sherrod Brown was an original cosponsor.
58 Senator Carl Levin, press release, “Levin-Brown Bill Would End Corporate Stock Option Tax Break, Reduce Deficit
by $25 Billion,” July 15, 2011, p. 1.
59 Ibid.
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Employee Stock Options: Tax Treatment and Tax Issues
• allow corporations to deduct stock option compensation on their tax returns in the
same year it is recorded on the corporate books, without waiting for the options
to be exercised;
• ensure research tax credits use the same method for calculating stock option pay
expenses when computing wages eligible for the tax credit;
• make no changes to stock option compensation rules for individuals, or for
incentive stock options under Section 422 of the tax code which may be used by
start-up companies and other small businesses;
• create a transition rule to ensure stock options granted before the enactment date
are tax deductible; and
• make stock option deductions subject to the existing $1 million cap on corporate
tax deductions for compensation paid to top executives of publicly held
corporations.60
On February 1, 2012, Facebook, Inc. filed a registration statement with the Securities and
Exchange Commission, which included its proposal to sell stock to the public.61 Subsequently, the
possible tax implications of Facebook’s IPO (initial public offering) were examined. While
Facebook, Inc. would not be liable for corporate income taxes, founder Mark Zuckerberg and
other holders of options would be subject to individual income taxes when they exercised their
options.62 Facebook’s registration statement indicated that it would receive a tax refund of up to
$500 million during the first six months of 2013.63
On February 29, 2012, Senator Cal Levin issued a floor statement alleging that Facebook
shareholders were benefiting from a tax loophole. The following excerpt is from his floor
statement.
According to its filings, when Facebook goes public, Mr. Zuckerberg plans to exercise
options to purchase 120 million shares of stock for 6 cents a share. Mr. Zuckerberg’s shares,
obviously, are going to be worth a great deal more than 6 cents, a total of about $7 million;
they will apparently be worth more than 600 times as much, something in the neighborhood
of $5 billion.
Here’s where the tax loophole comes in. Under current law, Facebook can perfectly legally
tell investors, the public, and regulators that the stock options he received cost the company a
mere 6 cents a share—that’s the expense shown on the company’s books. But the company
can also—perfectly legally later file a tax return claiming that these same options cost the
company something close to what the shares actually sell for later on—perhaps $40 a share.
And the company can take a tax deduction for that far larger amount. So the books show a
highly profitable company—profitable, in part, because of the relatively small expense the
company shows on its books for the stock options it grants to its employees. But when it
comes time to pay taxes, to pay Uncle Sam, the loophole in the tax code allows the company
to take a tax deduction for a far larger expense than they show on their books.64
60 Ibid., p. 2.
61 Facebook, Inc., Form S-1, Registration Statement under the Securities Act of 1933, February 1, 2012, 198 pp.
62 Shamik Trivedi, “Will the IRS Like Facebook’s IPO?,
Tax Notes, News and Analysis, February 13, 2012, p. 763.
63 Ibid.
64 Senator Carl Levin’s floor statement concerning the registration statement of Facebook, Inc. with the Securities and
(continued...)
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On March 5, 2012, an article in Forbes magazine presented an opposing point of view as
indicated in the following excerpts.
Facebook, the corporate entity … will not have to pay taxes on the amount of compensation
Zuckerberg makes in the form of his options. This is the supposed “loophole” that bothers
Senator Levin. Contrary to Senator Levin’s insinuation, American taxpayers aren’t going to
have to make up a thing; Uncle Sam is going to be paid plenty. He’ll be paid astronomical
sums of money in taxes by Mark Zuckerberg.
Where’s the harm here? From the U.S. Treasury’s standpoint, it’s mostly a wash, since the
Treasury will be paid handsomely regardless of whether it’s the company or its founder
paying the tax.65
On May 17, 2012, the day before Facebook’s IPO, Senator Levin issued a floor statement that
included the following excerpt.
The stock-option loophole should have been closed long before Facebook’s stock option
bonanza. But surely the case of Facebook illustrates to the Senate, to the Congress, and to the
American people why we should close this loophole. If Congress were to enact the Levin-
Sherrod Brown bill, S. 1375, it would close an unjustified corporate tax loophole that boosts
executive pay at the expense of everybody else.66
Author Contact Information
James M. Bickley
Specialist in Public Finance
jbickley@crs.loc.gov, 7-7794
(...continued)
Exchange Commission, February 29, 2012.
65 Nich Schulz, “Senator Carl Levin’s Strange Tax Attack On Facebook,”
Forbes, March 3, 2012. Available at
http://www.forbes.com/.
66 Senator Carl Levin’s floor statement concerning Facebook’s IPO, May 17, 2012.
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