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Fostering Access to Capital
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Making the R&D Tax Credit Permanent (adopted prior to 2003)

The Council supports the permanent extension of the research and development tax credit. This tax credit is an effective and proven incentive to businesses to maintain and increase their investment in US-based development activities.

Expensing of Stock Options (adopted in 2003)

The Council favors full and frequent disclosure to investors of the dilutive effects of stock options on earnings per share.

The Council opposes legislation that would force companies to expense the granting of stock options. Such legislation would severely damage the ability of technology entrepreneurs to build and retain their workforce through granting stock options to their employees and would likely end the use of stock options except for the most senior executives.

The real cost of employee stock options lies in the potential dilution of each investor’s share of company ownership. Requiring that employee stock options be counted as a compensation expense would result in double counting in the earnings per share calculation, which would provide misleading information to investors.

Even assuming that employee stock options are an expense, there are presently no pricing models that adequately value them. The only model for valuing stock options that does not mislead investors is the "intrinsic value” method set forth in APB Opinion No. 25, where the difference between the fair market value at the time of the grant and the grant price is expensed.

Most important, the Council believes that the intrinsic value method of valuation is particularly appropriate for broad-based employee stock ownership plans. The Council urges FASB to redirect its efforts to reform Statement No.123 toward stimulating a discussion of the intrinsic value method as it relates to the promotion of broad-based plans.

Alternative Minimum Tax on Incentive Stock Options (adopted in 2003)

The Council supports enactment of legislation providing relief from the AMT for ISOs because employees should be encouraged to acquire and hold stock in their employers. ISOs should be subject to tax upon their sale, not upon their exercise.

Payroll Taxes on Incentive Stock Options (adopted in 2003)

Allowing the exercise of ISOs to be subject to payroll taxes would be costly to employees, discouraging many of them from participating in stock option plans; this would be a disincentive for companies to offer these incentives to their employees, because companies would pay additional payroll taxes. Moreover, allowing ISOs to be subject to payroll tax withholding would encourage the IRS to require the withholding of income taxes on ISOs and to impose payroll and income tax withholding on non-qualified options.

Telecommunications Tax (adopted 2007)

The Council supports public policies that foster innovation and entrepreneurship and create a favorable business environment in the Commonwealth of Massachusetts. We support policies that are fair to all companies and provide a level playing field for all competitors. We also believe in and support policies that lower the overall tax burden on corporations, while recognizing the responsibility of the business community to pay its fair share to support the services and infrastructure that make Massachusetts a great place to live and work. We believe that, together, these policies will foster innovation, investment, and job growth within the Commonwealth of Massachusetts."

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