In an attempt to restore investor trust in company financial statements after the Enron fiasco, Senate legislation was introduced Wednesday that would try to scrap an accounting rule by which the energy giant and other companies offered tax-deductible stock options without listing the expenses on company balance sheets. 

"We've got to make sure that financial statements are credible," said Sen. Carl Levin, D-Mich. Joining him were GOP co-sponsors John McCain of Arizona and Peter Fitzgerald of Illinois, and Democratic Sen. Dick Durbin of Illinois.

"This double standard is exactly the kind of inequitable corporate benefit that makes the American people irate," McCain said.

The proposal would require that companies claiming tax deductions for stock options also report them as expenses against their earnings.

Enron, the bankrupt Houston-based energy giant that is the focus of multiple federal investigations, claimed almost $600 million in tax deductions for stock options it offered employees between 1996 and 2000, Levin said.

Yet unlike other forms of employee compensation, stock options do not have to be reported as expenses against company profits. In Enron's case, Levin said, the effect was overstatement of company earnings and complete elimination of federal taxes during those years.

Profit growth for the nation's 500 largest companies, would have been only 6 percent between 1995-2000, well below the 9 percent actually reported, if the loophole had been closed, Fitzgerald said.

Similar legislation introduced by Levin in 1997 made little headway due to strong opposition from business groups, already gearing up to fight the latest effort. Stock options offered by the 2,000 largest companies — they are particularly popular among high-tech businesses — have grown from $50 billion in 1997 to about $162 billion in 2000.

Financial Accounting Standards Board rules give companies the choice of reporting the estimated value of options as an expense or disclosing them as footnotes on their financial statements. Most larger companies use the footnote method.

Mark Nebergall, president of the Software Finance and Tax Executives Council, said the current rules adequately disclose stock options to investors through these footnotes and that the bill would restrict the use of options to attract topflight workers.

"It's going to make it prohibitively expensive for companies to give stock options to their rank-and-file employees," Nebergall said. "It's going to ensure that only the top employees would get stock options."

The Bush administration has yet to take a stand on the legislation.

Separately, the Securities and Exchange Commission said Wednesday it would propose changes to tighten corporate disclosure rules.

Among other things, the new rules would require more prompt filing by companies of their quarterly and annual reports, and of stock purchases and sales by company officers and directors.

The Associated Press contributed to this report.