An amendment to the Tax Cuts and Jobs Act which allows employees to elect to defer paying taxes on stock options for up to five years was recently hailed by the Small Business & Entrepreneurship Council (SBE Council).
Many startup companies offer employees stock options or equity ownership. If employees take them, they are required to pay taxes on them immediately. The problem, according to the amendment’s sponsors Rep. Kevin Brady (R-TX), is that employees sometimes lack the resources to do so because of low salaries.
Brady said this presents a barrier for some individuals to join a startup. His bill would allow them to defer paying taxes for up to five years.
SBE president and CEO Karen Kerrigan applauded the amendment.
“Chairman Brady continues to listen to entrepreneurs and the small business community about their ideas to improve the already strong tax reform package unveiled last week,” Kerrigan said. “The inclusion of this measure to ensure that employees of startup companies can effectively share in the success of the promising firms they work for will lead to more successful startups and higher levels of startup activity in the United States. Our economy will benefit greatly from the dynamism and innovation that more successful startups bring to the marketplace.”
Kerrigan added that this will help startups get off the ground and that’s good for the economy.
“Business dynamism needs to rebound, but weak entrepreneurship has been a big drag,” Kerrigan added. “A healthy policy ecosystem is vitally important to healthy entrepreneurship and the Tax Cuts and Jobs Act is transforming the tax code to support more investment, which will drive bigger economic growth and give people the confidence they need to start a business.”