Yes, the ESPP income reported on your W-2 box 1 would be considered taxable compensation.
You need taxable compensation to be able to contribute to an IRA. The IRS treats as compensation any amount properly shown in box 1 (Wages, tips, other compensation) of Form W-2, Wage and Tax Statement, provided that amount is reduced by any amount properly shown in box 11 (Nonqualified plans). (Publication 590-A, Contributions to Individual Retirement Arrangements (IRAs)).
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