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Trump tax bill Sec 3801 – Stock options become taxable upon vest

According to the recently proposed tax overhaul, Section 3801, stock options would be taxable immediately upon vesting. The bill is extremely copy/paste unfriendly, but the full text is here: https://www.scribd.com/document/363309136/Republican-Tax-Bill#download&from_embed The relevant section starts on page 295. 16 (a) IN GENERAL.—Any compensation which is de- 17 ferred under a nonqualified deferred compensation plan 18 shall be includible in the gross income of the person who 19 performed the services to which such compensation relates 20 when there is no substantial risk of forfeiture of the rights 21 of such person to such compensation. ... and ... 24 The term 'nonqualified deferred compensation 25 plan' shall include any plan that provides— 1 ''(i) a right to compensation based on 2 the value of, or appreciation in value of, a 3 specified number of equity units of the 4 service recipient, whether paid in cash or 5 equity, or 6 ''(ii) stock appreciation rights or stock 7 options. Can anyone who understands legalese shed some light on exactly what that will mean for those of us with stock option-based compensation?

chollida1 9y ago
Well Kieth Rabois thinks it does https://twitter.com/rabois/status/926130750444814336?ref_src=twsrc%5Etfw&ref_url=https%3A%2F%2Fd-23636655082619089073.ampproject.net%2F1508896929494%2Fframe.html https://twitter.com/rabois/status/926130750444814336?ref_src... So does CNBC https://www.cnbc.com/amp/2017/11/02/gop-tax-reform-bill-helpsemployee-stock-optoins.html https://www.cnbc.com/amp/2017/11/02/gop-tax-reform-bill-help... Looks like you can defer the taxes from exercised options until there is liquidity or 7 years pass.
- seattle_spring 9y ago
  They're both referring to the removal of AMT. It sure seems to me like this section overrides any benefits to startup employees with regard to AMT, and then makes the situation a whole lot worse to boot.
  - chollida1 9y ago
    I don't think I follow what you're saying, or more directly I think you are wrong. Can you provide any evidence to back up your claim and show me where I'm wrong?
    - seattle_spring 9y ago
      I'd love for you to explain why you think I'm wrong. I linked to the tax bill itself, which says it will tax stock options upon vest. You linked to a tweet that just says, without any proof, that the tax bill will remove taxes on stock options.
      - deleted 9y ago
        [deleted]
tlb 9y ago
This refers to non-qualified stock options. Most tech employees have qualified (incentive) stock options.

chollida1 9y ago

Well Kieth Rabois thinks it does https://twitter.com/rabois/status/926130750444814336?ref_src=twsrc%5Etfw&ref_url=https%3A%2F%2Fd-23636655082619089073.ampproject.net%2F1508896929494%2Fframe.html https://twitter.com/rabois/status/926130750444814336?ref_src... So does CNBC https://www.cnbc.com/amp/2017/11/02/gop-tax-reform-bill-helpsemployee-stock-optoins.html https://www.cnbc.com/amp/2017/11/02/gop-tax-reform-bill-help... Looks like you can defer the taxes from exercised options until there is liquidity or 7 years pass.

seattle_spring 9y ago
They're both referring to the removal of AMT. It sure seems to me like this section overrides any benefits to startup employees with regard to AMT, and then makes the situation a whole lot worse to boot.
- chollida1 9y ago
  I don't think I follow what you're saying, or more directly I think you are wrong. Can you provide any evidence to back up your claim and show me where I'm wrong?
  - seattle_spring 9y ago
    I'd love for you to explain why you think I'm wrong. I linked to the tax bill itself, which says it will tax stock options upon vest. You linked to a tweet that just says, without any proof, that the tax bill will remove taxes on stock options.
    - deleted 9y ago
      [deleted]

tlb 9y ago

This refers to non-qualified stock options. Most tech employees have qualified (incentive) stock options.