March 1, 2002

The Honorable Paul O'Neill
Secretary
U.S. Department of the Treasury
1500 Pennsylvania Avenue, NW
Washington, D.C. 20220

Dear Secretary O'Neill:

The undersigned companies and organizations wish to share with you our concerns regarding recently proposed rules that would impose employment withholding taxes on the purchase of company stock through qualified Employee Stock Purchase Plans ("ESPPs") and the exercise of Incentive Stock Options ("ISOs"), effective January 1, 2003.

As you know, a growing number of companies utilize ISOs and ESPPs as powerful incentives to attract and motivate employees. Studies consistently have shown that use of these employee ownership tools enhances corporate performance, while also strengthening management and worker relations. Moreover, workers are able to receive an equity stake in their efforts and thus may share in the benefits of increased business performance.

The proposed rules, by imposing employment withholding taxes and reversing 30 years of practice, will have a serious, adverse effect on rank and file workers, discouraging many of them from participating in these plans. Further, because the proposed rules dramatically raise the costs to provide and administer these plans, these new rules ultimately may cause employers to stop offering these incentives to their employees.

As employers, plan administrators and the organizations representing them, we strongly urge the Treasury Department and the Internal Revenue Service to withdraw the proposed rules imposing employment tax withholding and to clarify that the rules under which companies have been operating for the past three decades continue to apply.

Sincerely,

3M
ADC Telecommunications, Inc.
Aetna Inc.
Agilent Technologies, Inc.
American Bankers Association
American Benefits Council
AeA (American Electronics Association)
American Financial Services Association
American Payroll Association
America's Community Bankers
Apple
Applied Materials
Association for Competitive Technology
AT&T
Autodesk
Autozone
Biotechnology Industry Organization
BMC Software
Brinker International
Charles Schwab & Co., Inc.
Cisco Systems, Inc.
Citigroup
Cooper Industries, Inc.
Corning
Documentum
ERISA Industry Committee
Financial Executives International
The Financial Services Roundtable
Genentech
Household International
IDEC Pharmaceuticals
Intel
International Mass Retail Association
Intuit
Kellogg Company
Lowe's Home Improvement Warehouse
Magnum Hunter Production
Marriott International, Inc.
Massachusetts Software & Internet Council
Medtronic
Micron Technology
Microsoft
Motorola
National Association of Manufacturers
National Association of Stock Plan Professionals
National Retail Federation
National Venture Capital Association
Oracle
Principal Financial Group
Scientific Learning
Sears, Roebuck & Co.
Securities Industry Association
Semiconductor Equipment and Materials International
Simplex Solutions, Inc.
Society for Human Resource Management
Software Finance and Tax Executives Council
Software & Information Industry Association
Sun Microsystems
TL Ventures
U.S. Chamber of Commerce
VERITAS Software
Wind River Systems, Inc.
Xilinx