The House approved a bill on Thursday with bipartisan support that U.S. Rep. Erik Paulsen (R-MN) introduced to spur innovation and encourage employee ownership of startups.
The Empowering Employees through Stock Ownership Act, H.R. 5719, would help employees of startups take advantage of ownership interests and stock options by temporarily deferring tax obligations for them.
“Startup companies are the birthplace of innovation and the next ‘big idea,’ which is why this bipartisan legislation ensures this vital part of our present and future economy can attract the best talent,” Paulsen said. “By promoting employee ownership at these cutting-edge companies with a commonsense fix to our tax code, we can keep America on the forefront of innovation and entrepreneurship.”
Under current law, employees must immediately pay taxes on stocks and equity in compensation packages, even though employees often do not have the financial resources to do so. Paulsen’s bill would allow employees of startups to defer those tax payments.
U.S. Rep. Randy Hultgren (R-IL), a cosponsor of the bill, said that he is encouraged by House efforts over the last year to engage and incentivize employees.
“Workers who own a stake in the business they work for every day have an interest in seeing the business succeed,” Hultgren said. “It is best for businesses when its success is tied to the hard work and investment of its employees.”
House Majority Leader Kevin McCarthy (R-CA) said on the House floor that the innovation economy is a fundamental part of the American success story.
“The idea of innovation producing growth is why we’re voting today on Representative Erik Paulsen’s Empowering Employees Through Stock Ownership Act,” McCarthy said. “The truth is, when the startups are funded and founded, they can’t offer potential employees the same salaries and benefits as those companies that have already become household names. But they can offer partial ownership — the American dream. Offering stock options not only allows startups to attract the workers they need, it also gives employees a greater stake in the success of the company.”