The Financial Accounting Standards Board (FASB) recently approved the decision to apply ASC 718 — the accounting treatment that applies to equity awards granted to employees (and non-employee directors) — to equity awards granted to consultants and other individuals who are not employees. Applying ASC 718 to Non-Employees Previously, ASC 505-50 applied to equity awards that were granted to non employees. Under ASC 505-50, the vesting date — rather than the grant date — is…
On December 22, 2017, the Tax Cuts and Jobs Act was signed into law bringing significant changes to US tax law. One provision of the Act may further incentivize individuals to work as independent contractors instead of as traditional employees. The new provision allows for independent contractors, and for service providers structured as a partnership or other flow-through entities, the potential to deduct up to 20% of their revenue from their taxable income. And while…
On January 11, 2018, the IRS issued Notice 1036, which provides the percentage method tables for income tax withholding in 2018. Key developments include: The flat withholding rate on supplemental wages, such as equity awards, of $1 million dollars and under a year is now 22% – down from 25%. As anticipated, the mandatory supplemental withholding rate for compensation in excess of $1 million is now 37% – down from 39.6%. The backup withholding rate…
Join Baker McKenzie for a two-part webinar series to examine how the Tax Cuts and Jobs Act impacts compensation and benefits arrangements maintained by both public and private companies and what actions your company needs to take. PART 1: From the PRIVATE Company’s Perspective | January 9, 2018 We will discuss the provisions with the biggest impact on private companies, including the introduction of a new income tax deferral regime for options and RSUs relating to “qualified stock.” PART 2:…
As of December 20, 2017, both the House of Representatives and the Senate have voted to approve the final version of the Tax Cuts and Jobs Act, in substantially the form released by the Conference Committee on December 15th. The bill is expected to be presented to the President for signature before Christmas, making US tax reform a reality for 2018.
Under current law, taxpayers who hold multiple lots of the same shares can identify which shares are considered sold for purposes of calculating capital gains. Section 13533 of the Senate tax bill would eliminate this flexibility and mandate a first-in, first out (FIFO) approach. This will adversely impact employees who have acquired low cost basis company shares in the past and continue to hold those shares. The obvious – Following enactment, employees will want to…
U.S. tax reform continues to move through the Halls of Congress at a brisk pace. Yesterday the House approved the bill proposed by the House Ways and Means Committee. For a discussion of the compensation-related provisions of the House bill, please refer to our alert dated November 13, 2017. The current draft of the conceptual mark-up under review by the Senate Finance Committee (the “Senate Mark”) has been amended in a way that generally aligns…
If you have been following the progress of U.S. tax reform, you will know that one of the most significant proposed changes in the compensation arena is currently up in the air, with a conflict between the final bill approved last week by the House Ways and Means Committee and the conceptual mark-up now under review by the Senate Finance Committee (the “Senate Mark”). Specifically, the final House bill eliminated proposed changes that would have…
The proposed Tax Cuts and Jobs Act includes some very concerning changes to the tax treatment of equity-based awards granted to U.S. taxpayers. Please review our alert on these changes. We will monitor the proposed bill closely so please check back frequently. Best regards, Barbara
We know we are not supposed to get too excited about a proposed tax bill, but The Tax Cuts and Jobs Act, the amended version of which was released by the House on November 3, 2017, is no ordinary tax bill. Not only does it propose sweeping changes to the taxation of executive compensation and employee benefits, it aims to be effective as of January 1, 2018 – which means limited time to mobilize against…