The Securities and Exchange Commission (SEC) last year amended rules under the Securities Exchange Act of 1934 to shorten the securities transaction settlement cycle for most broker-dealer securities transactions, from “T+2” to “T+1,” meaning that securities transactions will need to be settled within one business day of the transaction date (“T”), effective as of May 28, 2024. Impact on Equity Awards The new SEC-required settlement timing will directly impact equity awards that are settled through…
On August 16, 2022, President Biden signed the Inflation Reduction Act (“IRA”) into law. One of the new provisions the IRA introduced is the stock buyback excise tax under Code section 4501, which applies as of January 1, 2023 and was designed to target large corporations that implement stock buybacks. Background Code section 4501 imposes a 1% excise tax on the value of covered corporation stock that is repurchased by the covered corporation or a…
2022 will be viewed as a year of political turmoil in the UK with three different prime ministers during the year. While all were leaders of the UK Conservative party, the tax policy objectives were significantly different leading to proposed changes being reversed in some cases. For more information on the latest developments in the UK, see our recent NASPP guest blog post here. *Thank you to our colleague Gillian Parnell in our London office…
On February 10, 2022, the Australian Parliament passed legislation which eliminates termination of employment as a taxable event for Employee Share Scheme (ESS) awards that qualify for tax deferral (i.e., stock options, restricted stock, restricted stock units (RSUs), or an employee stock purchase plan offered to employees). ESS awards that qualify for tax deferral are subject to taxation when an âESS Deferred Taxing Pointâ occurs. Currently, an employeeâs termination of employment is one of the…
There has recently been a great deal of interest in the grant of a profits interest. A profits interest is a beneficial form of incentive for an individual who performs services for a partnership or other pass-through entity, like a limited liability company. Bottom line, a profits interest (also commonly known as a “carried interest”) is a non-capital interest in the profits of a partnership or a membership interest in a limited liability company taxed…
California nonresident board members of companies based in California may soon be subject to income tax in California, regardless of whether they perform services within the state, if a newly proposed tax regulation is adopted. The proposed regulation â new section 17951-8 of Title 18 of the California Code of Regulations â released by the Franchise Tax Board of California on September 24, 2020, treats the compensation of a California nonresident, non-employee director of a…
Large companies doing business in San Francisco may soon be subject to an additional tax if voters approve the so-called âOverpaid Executive Gross Receipts Taxâ this coming November. Joining a minority of municipal governments that have imposed an âexecutive pay ratio taxâ on the heels of the SECâs CEO pay ratio disclosure rules, the San Francisco Board of Supervisors recently approved a ballot initiative for this Novemberâs election that calls for the imposition of a…
In an apparent follow-up to its General Legal Advice Memorandum dated May 18, 2020 (GLAM 2020-004), the IRS has issued an internal procedural update that (1) extends the application of the administrative waiver of late employment tax deposit penalties for stock options to stock-settled restricted stock units (âRSUsâ) and stock appreciation rights (âSARsâ) and (2) shortens the waiverâs deposit period by one day to align with current SEC securities open-market transaction settlement rules. The internal…
For an update on this development, see our July 15, 2020 post here. The IRS has issued a General Legal Advice Memorandum (GLAM 2020-004) that could increase the audit risk and exposure for late deposit penalties for companies granting stock-settled restricted stock units (âRSUsâ) and either (i) not making their next-day employment tax withholding deposits with the IRS within one day of when they request their transfer agent to transfer shares underlying the RSU award…
Sweden has not been a country previously featured in this blog, but we have become aware that the Swedish Tax Agency (the “STA”) has contacted several local employers in recent months to seek clarification on the amounts withheld in relation to equity award income and correct the reporting where needed. We believe it is possible that many more companies could be audited with respect to their equity award tax withholding practices in 2019 and beyond.…