A rare provision in San Francisco’s business tax code that taxes companies when employees cash in their stock options has caused a stir in this hotbed of fledgling tech companies. Remarkably, few companies even knew about the tax, which has been in effect for seven years. But since city officials offered Twitter a payroll-tax break as an incentive for it to remain in San Francisco (the company is considered likely to go public soon), the stock-option provision has suddenly come under intense scrutiny. A number of other booming companies, including Zings, the maker of online games and one of the city’s fastest-growing firms, have threatened to leave the city unless they receive similar payroll-tax exemptions before going public.
Unlike most cities, San Francisco generates most of its business tax revenue through a payroll tax. The Twitter exemption bill, which will be considered by the full Board of Supervisors on April 5, would freeze payroll taxes for six years along a strip of Market Street—where Twitter is set to relocate—and several square blocks in the Tenderloin neighborhood. Twitter executives had been concerned because since 2004 the city’s payroll tax code has counted stock options granted to employees as compensation, which is taxed at 1.5 percent. If Twitter goes public in San Francisco and a large number of workers exercise their options, the city would tax the company on its employees’ stock gains—a bill likely to amount to tens of millions of dollars. "Twitter could be looking at a significantly larger payroll tax liability if and when it goes public," said Ted Egan, the chief economist in San Francisco’s controller’s office.
Because of the dearth of I. P. O. ’s inside the city limits in the last decade, the stockoption tax has gone under radar until now. Businesses, city officials and even seasoned tax lawyers are confounded. "Nobody ever talked about this because nobody’s really tested these issues before," said Thomas H. Steele, a partner in Morrison & Foerster’s San Francisco office, specializing in state and local tax. He said that his clients began calling him this week to ask about the tax’s ramifications. "A Pandora’s box has already been opened," said Supervisor Ross Mirkarimi, a member of the Board of Supervisors’ budget and finance committee, who has expressed concern about tailoring legislation for one company. "We’ve been going about this the wrong way," he said. The recent confusion has added impetus to calls for comprehensive business tax reform by David Chiu, the board president. "The stock option problem is real," Mr. Chiu said. "We have to address it in a fair and responsible way.
According to the first paragragh,we know（）
A. there are many high tech companies in San Francisco
B. payroll-tax break is unreasonable
C. other companies are jealous of Twitter
D. city officials offered tax-free for listed companies
