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That's at least as much on the companies involved as the tax code. Companies are not only far better situated to understand the tax situation (wilson sonsini o

by x0x0 11y ago

That's at least as much on the companies involved as the tax code. Companies are not only far better situated to understand the tax situation (wilson sonsini or fenwick make a living understanding/optimizing for it) but also have, and afaik always had, the choice to make employee-friendly comp choices such as turning ISOs into NSOs, giving RSUs in lieu of options, or perhaps even early exercise and 83b elections for all. It's fair to say that golden handcuffs aren't exactly making CEOs cry themselves to sleep at night, and it might be fair to say they even like them.

ChuckMcM 11y ago
Except I'm not talking about CEOs who typically have packages which not only vest stock but pay the taxes for them. I'm talking about rank and file employees (like the Gilt employees in the article) who end up owing taxes, on gains they were never able to realize, which exceed their net worth. They are the ones that get pushed into bankruptcy when the IRS freezes their assets. The story I expect to read is probably an Unicorn employed engineer who exercises their options (perhaps this month) because they are leaving, and owes a huge tax bill come April 15th of next year, and by the time next year roles around their Unicorn is dead and they have worthless stock and a huge tax bill, and they are in debt because they borrowed money to exercise their option. The very definition of being 'upside down' in accounting terms. I'd love it if that doesn't happen, but given this story on Gilt I'm pretty sure we'll see more like it.
- x0x0 11y ago
  I think I wasn't clear. I meant that, from CEOs' perspectives, the tax code is a feature not a bug. CEOs have the ability to work around this for their employees in multiple ways (NSO conversion, early/83b, RSUs, allowing sales via eg secondmarket) and don't.
  - ChuckMcM 11y ago
    Ah I see now. I wonder if this would be a good topic for a YC dinner at some point, if it isn't already. You are absolutely correct that there things you can do to mitigate the pain.
- s73v3r 11y ago
  CEOs are the ones who make the decisions on what kind of stock program to implement.

by x0x0 11y ago

ChuckMcM 11y ago

Except I'm not talking about CEOs who typically have packages which not only vest stock but pay the taxes for them. I'm talking about rank and file employees (like the Gilt employees in the article) who end up owing taxes, on gains they were never able to realize, which exceed their net worth. They are the ones that get pushed into bankruptcy when the IRS freezes their assets. The story I expect to read is probably an Unicorn employed engineer who exercises their options (perhaps this month) because they are leaving, and owes a huge tax bill come April 15th of next year, and by the time next year roles around their Unicorn is dead and they have worthless stock and a huge tax bill, and they are in debt because they borrowed money to exercise their option. The very definition of being 'upside down' in accounting terms. I'd love it if that doesn't happen, but given this story on Gilt I'm pretty sure we'll see more like it.

x0x0 11y ago
I think I wasn't clear. I meant that, from CEOs' perspectives, the tax code is a feature not a bug. CEOs have the ability to work around this for their employees in multiple ways (NSO conversion, early/83b, RSUs, allowing sales via eg secondmarket) and don't.
- ChuckMcM 11y ago
  Ah I see now. I wonder if this would be a good topic for a YC dinner at some point, if it isn't already. You are absolutely correct that there things you can do to mitigate the pain.
s73v3r 11y ago
CEOs are the ones who make the decisions on what kind of stock program to implement.