Silicon Valley blasts move to tax startup options

San Francisco

A PROPOSAL by the US Senate to change the way that shares in startup companies are taxed incited panic and dread in Silicon Valley on Monday, with startup founders and investors warning of nothing less than the demise of their industry should the proposal become law.

The provision in the Senate's tax reform plan, which appeared to catch the industry by surprise, involves the treatment of employee stock options. These options give the holder the right to purchase shares in the future at a set price and can be very valuable if a company does well, and the share price increases.