Non-Qualified Stock Options (NQSOs) are a type of employee stock option that does not meet the requirements set by the Internal Revenue Code for favorable tax treatment. When employees exercise NQSOs, they pay ordinary income tax on the difference between the exercise price and the fair market value of the stock at that time. This means that employees may face a higher tax burden compared to other types of stock options. Unlike Incentive Stock Options (ISOs), NQSOs can be granted to a wider range of recipients, including employees, consultants, and board members. Companies often use NQSOs as a way to attract and retain talent, providing employees with the opportunity to purchase company stock at a predetermined price.