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Larkspur, California
May 7, 2007
The Honorable Chairman Richard Neal
The Honorable Ranking Member Phil English
Select Revenue Measures Subcommittee
1102 Longworth House Office Building
Washington DC 20515
Dear Chairman Neal and
Ranking Member English:
I am writing on behalf
of myself and my family, regarding a huge AMT tax debt that we incurred on
“phantom” gains due to the application of the Alternative Minimum Tax to
incentive stock options (ISOs). This grossly unfair tax, which in my case
amounted to an effective tax rate of 106% on stock sales, cost me everything I
owned. I lost my home, life savings and children’s college funds as a direct
result of the AMT.
I would like to thank
Congress and in particular the Members of the Ways and Means Committee and
Select Revenue Measures Subcommittee, for the ISO AMT Relief passed last year. This
relief brings a ray of hope and the beginning of the end to a financial nightmare
that my family and I have been living for nearly seven years. We struggle to
express our deep gratitude for the Relief Legislation, which takes a big step
forward to restoring fair return of tax overpayment credits that were generated
when the stock value plummeted and ISO AMT tax became grossly disproportionate
to any gain actually made on the stock. Unfortunately, the bill does not
provide any relief in my case.
For this reason, I would
respectfully ask for your continued support for important issues that remain
unresolved for many ISO AMT victims, my family included. These issues are (i)
ongoing ISO AMT liability and associated interest and penalties, and (ii) the
income phase-outs that leave my family with no relief.
Removing Relief
Phase-out for American Families. A
significant change was made to the relief in HR3385 when it was included in the
Tax Relief and Health Care Act of 2006, in that an income phase-out provision
was added that leaves many American families with no relief or only partial
relief. This phase-out was not a part of the widely supported Johnson/Neal
HR3385. HR3385 recognized that families should pay their fair share of tax on
money actually received, regardless of income level. Also, these income
phase-outs unfairly targeting families in high cost-of-living States and
Districts such as Silicon Valley, Massachusetts, New York, Connecticut and
Virginia; those families are suffering as much from unfairly disproportionate
taxation as people with lower incomes in other areas.
The phase-outs
themselves have serious unintended consequences by forcing affected employees
to quit work or lower productivity in order to recover their credits, thereby
robbing companies and the economy of the services of high value employees, and
robbing the Treasury of tax revenue that would otherwise be collected from
these people if they were fully productive. Additionally families are frozen in
their footsteps for 5 years, for instance if they were to receive a spike in
salary or one-time bonus, they're also prevented from selling their homes or in
the case of a death of a relative who left some of their estate, are left with
the Hobson's choice of forgoing some or all of an intended credit refund
because your collective AGI exceeded the Cap thresholds or limits.
I want to once again
express my gratitude to Congress for all it has done and is doing to help
families across the country suffering from ISO AMT. Please do not hesitate to
contact me if you have any questions.
Sincerely,
Herman
Bluestein
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