According to one of the previous articles on this subject, this provision actually requires companies to pay taxes on their employees' options based on the company's valuation, even if those employees aren't even able to sell those shares.
The example I remember was that if a company raised a bunch of money at a ~$1B valuation but was later acquired for a significantly smaller sum, they would have already paid taxes on their employees' stock option gains at the ~$1B valuation based on the increase in perceived value of their shares at the time they raised money.
Edit: what I said above is in line with what pg said in his comments here:
The difference between the two cases is that the employees are being taxed out of money they have (if they exercise and sell) whereas the company is being taxed based not on revenues but on the appreciation of its stock. So a company whose valuation shot up in advance of anticipated revenues could find itself with a bill it had no money to pay.
The example I remember was that if a company raised a bunch of money at a ~$1B valuation but was later acquired for a significantly smaller sum, they would have already paid taxes on their employees' stock option gains at the ~$1B valuation based on the increase in perceived value of their shares at the time they raised money.
Edit: what I said above is in line with what pg said in his comments here:
The difference between the two cases is that the employees are being taxed out of money they have (if they exercise and sell) whereas the company is being taxed based not on revenues but on the appreciation of its stock. So a company whose valuation shot up in advance of anticipated revenues could find itself with a bill it had no money to pay.