I thought about this, and if the taxation trigger is "tax upon vesting", and the vesting is done when the options are ISOs, I would think that it is possible that this legislation is worded in a way so that an ISO -> NQO conversion does not trigger a tax event.
Is it clear what tax impact the conversion has? Arguably that's the moment when you "vest NSO options", but then the entire tax blow would drop upon leaving the company, which would be particularly bizarre.
(Is the proposed law even clear about how this would work?)
