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 (“RSUs”) 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.…
The Tenth Circuit has affirmed the district court’s dismissal of a plaintiff shareholder’s claim that withholding shares to satisfy taxes on a restricted stock unit (RSU) violated Exchange Act Section 16(b) (see Olagues v. Muncrief, No. 18-5018 (10th Cir. 2019)). As we outlined last year in a blog on the lower court’s decision, the plaintiff’s claim was based on the non-exempt acquisition of shares by two executives within six months of the date that shares…
On December 7th, the IRS issued Notice 2018-97 to provide initial guidance on the new private company income inclusion deferral regime enacted under Code Section 83(i) as part of the 2017 Tax Cuts and Jobs Act (“Section 83(i)”). Under the deferral regime, eligible employees of eligible privately-held companies may elect to defer payment of federal income taxes due on exercise of stock options or settlement of restricted stock units (“RSUs”) for up to five years…
Now that we have had a couple of weeks to digest the IRS’s guidance in Notice 2018-68 on the Tax Cuts and Jobs Act’s (TCJA’s) amendments to Code Section 162(m), it’s a good time to take a closer look at the “grandfathering” rule. As a reminder, the TCJA (i) eliminated the “performance-based compensation” exception to Section 162(m)’s $1 million limit on the deductibility of covered employee compensation, (ii) expanded and made permanent the group of…
In a Private Letter Ruling released on August 17, 2018 (PLR 201833012) (“Ruling”), the IRS approved an employer’s proposed amendment to its 401(k) plan (“Plan”), under which it would make an employer non-elective contribution on behalf of an employee conditioned on the employee making student loan repayments (“SLR non-elective contribution”). As described in the Ruling, the proposed student loan repayment benefit program (the “program”), is a voluntary program under which the employee must elect to…
Last week, the IRS issued Notice 2018-68 containing initial guidance on the amendments to section 162(m) made by the Tax Cuts and Jobs Act (“TCJA”), including the transitional relief for written binding contracts. On balance, the guidance is not particularly favorable to taxpayers, as it takes a narrow view of the grandfathering relief for arrangements in effect under prior law, particularly for arrangements with negative discretion, and a broad view of the new group of…
After discussing the issues for a tax deduction for share-based awards in Israel in my last blog, I wanted to revisit another tax deduction conundrum, this time in Canada. In the past, the Canada Revenue Agency (CRA) generally has not allowed a local tax deduction for the cost of share-settled awards (other than under very narrow circumstances). However, based on a technical interpretation released on April 12, 2017, the CRA updated its position such that…
I hope most of you have seen our client alert on the recent Israeli Supreme Court ruling that confirmed that stock-based compensation has to be included in the cost base of Israeli subsidiaries of multinational companies. As a result of the decision, we have already seen a flurry of activity as many companies are evaluating how to obtain a tax deduction for awards granted to Israeli employees. As a reminder, for companies with a cost-plus…
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…