However one may feel about the idea of this tax, why is there a disconnect between companies' tax filings and their financial statements in the first place?

Under current accounting rules, corporations report stock option expenses on their financial statements using the value of the options on the date they are granted; and this expense is recorded in the year that they're granted. In contrast, under federal tax law, corporations deduct stock option expenses on their tax returns when the options are exercised. The company expense is the difference between the stock price and the exercise price. Assuming the stock itself has risen above the exercise price, which typically is the case, the amount companies deduct in determining their taxable income will be higher than the expense they show on their financial statements. This results in lower taxable income --- and, of course, lower taxes.

Also, according to Sen. Levin, IRS data shows that, each year from 2005 to 2009, corporations' deductions for stock options were billions of dollars greater than the expenses shown on their financial statements; the annual difference ranged from $12 billion to $61 billion. IRS data also show that in 2005, 2007, and 2008, about three-quarters of these deductions were claimed by about 250 corporations.

"Stock options are the only type of compensation where the tax code lets a corporation deduct more than the expense shown on their books," Sen. Levin said in . "In fact, if corporations took tax deductions for compensation in excess of what their books showed, it could constitute tax fraud."