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My understanding is that RSUs were not affected as negatively by the original bill as were ISOs. Generally RSUs are given out at mature companies where liquidat

My understanding is that RSUs were not affected as negatively by the original bill as were ISOs. Generally RSUs are given out at mature companies where liquidation is possible after exercise. For publicly traded companies, that can even mean automatically liquidating at the same time as exercise. For large private companies, hopefully there is a buy back scheme or secondary market enabling liquidation. The real issue was with ISOs, which are most common in early startups with no liquidation options. If you can’t liquidate your shares (and may never be able to), but you get taxed on the spread between 409A valuation / strike price, you could easily become bankrupt or go heavily into debt. As for why anyone would prefer a lottery ticket over straight cash, that comes down to personal preference. If you’d rather take the cash, good for you. But consider that Silicon Valley was built on decades of employees becoming millionaires from early stock options. Clearly some people prefer to take the risk. And if they take that risk, they should be able to capitalize on its returns. Of course they should pay tax on those returns. The problem was the original bill (and the current status quo, to some degree) expected that tax before the employee saw any money, which they may never see. As an aside, if you want cash over options, you’re probably better off just working at $BigCo for a higher salary and immediately liquidatable shares of one of the top companies in the world.

chimeracoder 9y ago
> If you can’t liquidate your shares (and may never be able to), but you get taxed on the spread between 409A valuation / strike price, you could easily become bankrupt or go heavily into debt. This is already the case. What the bill would have changed: it would have taxed this at the point of vesting, rather than the point of exercise.
sulam 9y ago
ISOs weren’t affected at all in the original. The stink was because the sorts of options executives and directors often receive (NSOs) had their tax treatment changed. This is about the rich getting richer. I suspect coupling the tax bill with repeal of the healthcare mandate will mean it goes nowhere, though.
- sulam 9y ago
  (And yes, RSUs as currently constructed were affected, but it seemed likely that there were simple ways to fix them.)
- erichurkman 9y ago
  They're also used by US companies for foreign employees and contractors. Tons of people, even non-executives, at later stage companies hit the $100,000 ISO limitation just due to high valuations, too. [Over 25% of the stock grants that we track are NSO, and most of those are not executives or directors. Disclaimer: I work at Carta, fka eShares, and we track a lot of grants.]
  - sulam 9y ago
    Is it possible that you have a biased view of the options that are out there? I have never received NSOs and don’t know any non-executive who has, after 9 startups, two of which were definitely late stage (they went public) and one of which arguably was (acquired for over $100M). This bill would’t have changed my compensation at all of the startups where I’ve worked except for one aspect — the removal of AMT. Honestly we have way bigger things to be worried about in this bill, even if you focus narrowly on issues startups have. For instance, removing the individual mandate likely means the ACA health care market will collapse. This will make it less likely that people who need healthcare coverage will be able to start companies. I’d love to see the startup community up in arms about THAT.
    - erichurkman 9y ago
      The 25% figure was across about half a million grants, so there are a lot more NSOs than you'd expect.
      - sulam 9y ago
        What's that work out to in people? And maybe more interestingly, is the percentage of people getting NSOs lower than 25%? I bet you get a lot of frequent fliers, and the ones getting NSOs seem like they'd a big percentage of the platinum fliers in your service.

chimeracoder 9y ago

> If you can’t liquidate your shares (and may never be able to), but you get taxed on the spread between 409A valuation / strike price, you could easily become bankrupt or go heavily into debt. This is already the case. What the bill would have changed: it would have taxed this at the point of vesting, rather than the point of exercise.

sulam 9y ago

ISOs weren’t affected at all in the original. The stink was because the sorts of options executives and directors often receive (NSOs) had their tax treatment changed. This is about the rich getting richer. I suspect coupling the tax bill with repeal of the healthcare mandate will mean it goes nowhere, though.

sulam 9y ago
(And yes, RSUs as currently constructed were affected, but it seemed likely that there were simple ways to fix them.)
erichurkman 9y ago
They're also used by US companies for foreign employees and contractors. Tons of people, even non-executives, at later stage companies hit the $100,000 ISO limitation just due to high valuations, too. [Over 25% of the stock grants that we track are NSO, and most of those are not executives or directors. Disclaimer: I work at Carta, fka eShares, and we track a lot of grants.]
- sulam 9y ago
  Is it possible that you have a biased view of the options that are out there? I have never received NSOs and don’t know any non-executive who has, after 9 startups, two of which were definitely late stage (they went public) and one of which arguably was (acquired for over $100M). This bill would’t have changed my compensation at all of the startups where I’ve worked except for one aspect — the removal of AMT. Honestly we have way bigger things to be worried about in this bill, even if you focus narrowly on issues startups have. For instance, removing the individual mandate likely means the ACA health care market will collapse. This will make it less likely that people who need healthcare coverage will be able to start companies. I’d love to see the startup community up in arms about THAT.
  - erichurkman 9y ago
    The 25% figure was across about half a million grants, so there are a lot more NSOs than you'd expect.
    - sulam 9y ago
      What's that work out to in people? And maybe more interestingly, is the percentage of people getting NSOs lower than 25%? I bet you get a lot of frequent fliers, and the ones getting NSOs seem like they'd a big percentage of the platinum fliers in your service.