CHANGE IN TAX TREATMENT OF QUALIFIED STOCK OPTIONS.

SEC. 603. CHANGE IN TAX TREATMENT OF QUALIFIED STOCK OPTIONS. (a) In General.— Section 422(b)(defining qualified stock option) is amended by inserting “and before May 21, 1976 (or, if it meets the requirements of subsection (c)(7), granted to an individual after May 20, 1976),” after “section 424(c)(3)(A))” (b) Certain Options Granted After May 20, 1976.— Section 422(c) (relating to special rules) is amended by adding at the end thereof the following new paragraph; “(7) Certain options granted after mat 20, 1976.— For purposes of subsection (b), an option granted after May 20, 1976, meets the requirements of this paragraph— “(A) if such option is granted to an individual pursuant to a written plan adopted before May 21, 1976, or “(B) if such option is a new option substituted, in a transaction to which section 425(a) applies, for an old option which was granted before May 21, 1976, or which met the requirements of subparagraph (A). An option described in the preceding sentence shall be treated as ceasing to meet the requirements of this paragraph if it is not exercised before May 21, 1981.” (c) Restricted Stock Options Must Be Exercised Before May 21, 1981.— Section 424(c)(3) (relating to special rules for restricted stock options) is amended by adding at the end thereof the following new sentence: “An option described in the preceding sentence shall be treated as ceasing to meet the requirements of this paragraph if it is not exercised before May 21, 1981.” (d) Effective Date.—The amendments made by this section shall apply to taxable years ending after December 31, 1975.