The company reported quarterly earnings of 16 cents a share (before a 3-cent deduction for stock compensation) versus the mean estimate of 10 cents.
At the time of exercise, in 2007, net income would be increased by $4 million, the amount of the tax deduction for the compensation expense based on the gains to employees ($15 $10 = $5$5 per share times 2 million shares = $10 million times 40%, assuming a 40% state and federal tax rate).
And it agreed to a proposal by Senator Blanche Lincoln, Democrat of Arkansas, that would prevent health insurance companies from taking tax deductions for executive compensation in excess of $500,000.
McCain-Levin quite simply fixes a loophole in the tax code: Deductions for stock compensation in financial reports and on tax returns ought to be symmetrical.
In a bit of reflux from the big Wall Street scandal involving backdated stock options, the Cheesecake Factory has sued the Internal Revenue Service over its disallowance of $2.7 million of deductions for executive compensation.
Specifically, the Levin-McCain bill, also known as the "Ending the Double Standard for Stock Options Act," (more popularly known in business quarters as "that Levin-McCain bill"), would limit a company's tax deductions for stock compensation expense to the amount shown in the company's financial statements.
The "CEO/Employee Pay Fairness Act" would deny corporate tax deductions for executive compensation over $1 million -- unless they raise salaries for lower-level workers to keep pace with cost of living and labor productivity increases.
Van Hollen accomplishes this by proposing to end corporate tax deductions for executive compensation of over $1 million, unless the corporation's wages are raised enough to keep up with worker productivity and the cost of living.
The I.R.S. allows companies to take a mirror deduction for the employees' option compensation.
One, offered by Senator Blanche Lincoln, Democrat of Arkansas, would have limited the tax deductions that health insurance companies could take for compensation paid to top executives.
