When does this go into effect?
House Passes Employee Stock Options Bill Aimed at Startups
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Re: House Passes Employee Stock Options Bill Aimed at Startups
#182when does this go into effect?
Re: House Passes Employee Stock Options Bill Aimed at Startups
#183Earlier quoted context omitted.
You'll (very probably) still owe AMT taxes. Just because the house passes a bill doesn't mean it's a law. It also has to pass the Senate and be signed by the President (or go through the veto process).
If this bill did pass, would I not owe taxes?
Unclear. Probably you still would. Generally new laws only affect future years though it can depend.
Re: House Passes Employee Stock Options Bill Aimed at Startups
#184This sounds great, though requiring "offering 80% of the workforce stock" and excluding highest paid executives seems vague - is this at time of hiring, when stock is issued, fully vested, when taxes are due, somewhere inbetween? I parted ways with a startup in the valley last year and exercised some shares on January 13th. If I had exercised just two weeks earlier, I'm told I would've been hit with north of 50k in A…
From the bill, a corporation qualifies (aka the current state of affairs) if... such corporation has a written plan under which, in such calendar year, not less than 80 percent of all employees who provide services to such corporation in the United States (or any possession of the United States) are granted stock options, or restricted stock units, with the same rights and privileges to receive qualified stock.
So there's no way it could be retroactively applied, then. Bummer!
Re: House Passes Employee Stock Options Bill Aimed at Startups
#185Earlier quoted context omitted.
This is the current meme on Hacker News, but IMHO the pendulum has swung too far. You should absolutely be very careful about working for an early-stage startup as an employee and taking options or equity in lieu of part of your salary. You should feel that you trust the founders. You should insist that they've figured out a.) who their customers are b.) why they want the product and c.) how to make money, and have s…
Honest question: do you think you could have chosen that companies were not "losing bargains" seven years ago? How many companies are there today that you think would grant you significant equity and also will reach liquidity in the next seven years? How would this change if you were an early twenty-something with few connections and little savings? Off the top of my head I can only think of a handful of companies to…
Obviously I didn't choose right - the first two startups I worked for both failed. And then I was like "Never again" - I was the voice on HN saying that early employees get screwed, c. 2008 - and that blanket prohibition made me miss out on being employee #2 at DropBox (along with 10 or so other startups that went nowhere).
More to the point, though - I don't think that the point of a career should be to minimize risk. Or rather, you certainly can choose to minimize apparent risk - but that usually means that whoever owns the least risky option (probably Google, today) will use that as a lever to get you to accept whatever terms they give you, which is its own form of risk. Ironically, very few of the senior software engineers I knew at Google actually had "Work at Google" as a career goal - most of them were ex-startup-founders, or Ph.D dropouts, or had toured in a punk rock band decided they want an office job, or washed out of law school and figured programming looked more interesting. You gain a lot of confidence by failing at something you thought was important to you, and that helps you focus on the next thing that's important to you.
I think that your goal, when you're a 20-something with few connections and little savings, should be to gain experience as quickly as possible. That's what lets you take prudent risks when you do have the means to do so. If you've never failed at something or gotten screwed over when you're 40, you're probably about to start, and your failures will be much more visible, painful, and harder to recover from than if you fail when you're 22.
Re: House Passes Employee Stock Options Bill Aimed at Startups
#186Earlier quoted context omitted.
Only in years where you have no AMT liability. GL with two earners in California. While you have AMT liability you have to keep endlessly carrying forward your 0% interest loan to the govt.
1- I don't know how exactly AMT liability interacts with the capital loss carry over 2- Almost nobody hits the AMT jackpot year after year. 3- Ask your CPA and California's tax system is one of the worst in the country. They keep milking that SV cash cow year after year, and it is drying up but they don't seem to care :)
A lot of people in California (and NY, NJ, etc) hit AMT every year. Two incomes, with very large deductions for state income tax, mortgage interest, and property taxes paid.
Re: House Passes Employee Stock Options Bill Aimed at Startups
#187Earlier quoted context omitted.
This is not correct. The main reason that employees exercise options "early" is if they change jobs and have to exercise to keep their options.
Or because exercising early means you pay some long term capital gains instead of income tax.
Ya, totally true too.
Re: House Passes Employee Stock Options Bill Aimed at Startups
#188Earlier quoted context omitted.
If the company goes bust before you get liquid, isn't that a loss commensurate with your gain that could be used to offset it?
No, you realize ordinary income tax on the spread, which is payable in full in the year realized (or in the year to which it is deferred under this measure) while the loss of the stock value is a capital loss, which can only be offset against other capital gains or deducted at the rate of $3,000 per year. So you could easily have a situation in which you realize tens or hundreds of thousands in ordinary income on whi…
Then that very much seems like the missing piece here...
Re: House Passes Employee Stock Options Bill Aimed at Startups
#189Earlier quoted context omitted.
> a company’s highest-paid executives would not be able to defer taxes on their stock under the legislation. Where is the line drawn on this? I am a companies highest paid executive... I make a whopping $100k. Some of the others have no pay check at all. Exersizing would net a $40k tax bill for me. 40% of my pre-tax take-home pay. But as the highest paid executive am I exempt from deferring? Edit: to answer my own qu…
To be honest, if they can afford to work without being paid, they're probably fairly well off already.
Well based on this bill unless they are the CIO or CEO they can defer their taxes. Whereas I can't. Yet I have much less wealth than the other people. So the bill doesn't really help in my case. And being an early stage employee having an executive title is very common.
Re: House Passes Employee Stock Options Bill Aimed at Startups
#190Earlier quoted context omitted.
High consumption tax creates an incentive to not spend your money, which is bad.This also means the millionaires and billionaires of the world get to invest their money tax-free to earn even more money, often with rent-seeking, while 95% of America is getting taxed essentially up front on the vas majority of their earnings because it gets spent on stuff like housing, food, and healthcare. This creates a massively reg…
If people don't spend their money that is wonderful! They did a whole bunch of useful works and in exchange accepted a bunch of green pieces of paper for that work! They never consumed any resources, just ones and zeros in a computer. Instead of paying 40 percent in taxes, they paid 100 percent!
Obviously you're being sarcastic - you're right, the money gets spent eventually. But not by the billionaire. It gets spend by his kids, and his kid's kids, and so on, for generations. Meaning money that should have been taxed once in a single year is instead taxed over the course of 200 years and increasingly so on tax-exempt consumption. Meanwhile, that tax-free money is being used to invest in rent-seeking enterprises, meaning the cost of living for everyone else is being driven up. It's essentially a free loan from the US government for decades upon decades.