Proposed Tax Reform Stands to Impact Equity and Performance-Based Compensation
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Re: Proposed Tax Reform Stands to Impact Equity and Performance-Based Compensation
#2Overall I think average comp full time employees at eaely stage startups will be a big beneficiary. They won't hit the exercise threshold, AMT will be gone, and ISO tax benefits and 409A valuation will remain.
One problem I see is that the extended exercises that are popular these days convert from ISO to NQOs, so I wonder what that treatment will be like.
Contractors lose some flexibility over NQOs, but imho they were unlikely to have extended exercise periods anyways so I think the impact is not as large as communicated?
Executive especially at late stage companies lose out because of the exercise cap, but they're doing extremely well anyways so whatever.
Employees at late stage companies might be in a bind here. They probably won't hit the ISO exercise cap (BC the value should be 409A based target than preferred price based) but the currently popular method of giving out RSUs that don't officially "vest" until the company goes public (or the employee leaves, I imagine) might get affected, and that's potentially significant.
Re: Proposed Tax Reform Stands to Impact Equity and Performance-Based Compensation
#3Since most ISOs permit early-exercise, isn't this a moot point? (if a given ISO permits exercise upon issue, since the value of a newly issued ISO must be zero, then this $100K cap is not an issue?)
> In particular, under the current tax rules, the total aggregate fair value of ISOs that become exercisable for an individual employee for the first time within a calendar year may not exceed $100,000. ISOs that fail to comply with this provision are treated as non-qualified stock options. Companies with higher valuations would easily hit this threshold for executives and highly-paid employees and therefore would have limited reprieve from 409B.
EDIT: it says “become exercisable”, which is completely separate from actual exercise
Re: Proposed Tax Reform Stands to Impact Equity and Performance-Based Compensation
#4Overall I think average comp full time employees at eaely stage startups will be a big beneficiary. They won't hit the exercise threshold, AMT will be gone, and ISO tax benefits and 409A valuation will remain. One problem I see is that the extended exercises that are popular these days convert from ISO to NQOs, so I wonder what that treatment will be like. Contractors lose some flexibility over NQOs, but imho they we…
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Re: Proposed Tax Reform Stands to Impact Equity and Performance-Based Compensation
#5The tax bill is generally geared to screw over tech. In particular, eliminating the state income tax exemption will severely impact anyone in California.
Are you still happy with #resisting anything the administration tries to do? Still happy you're censoring conservatives? Still happy Damore was fired? Still happy with your endless virtue-signaling? Still feeling good about enforcing political correctness? Still wanting to #killallmen?
Here's what you get for your trouble.
Re: Proposed Tax Reform Stands to Impact Equity and Performance-Based Compensation
#6Since most ISOs permit early-exercise, isn't this a moot point? (if a given ISO permits exercise upon issue, since the value of a newly issued ISO must be zero, then this $100K cap is not an issue?) > In particular, under the current tax rules, the total aggregate fair value of ISOs that become exercisable for an individual employee for the first time within a calendar year may not exceed $100,000. ISOs that fail to…
I would suppose that it matters on the margins when the exercise cost is nontrivial for the early to mid career employee with low liquid assets. (Say mid 5 figures)
There won't be a tax bill but they may be pressed to come up with the exercise funds
Re: Proposed Tax Reform Stands to Impact Equity and Performance-Based Compensation
#7Since most ISOs permit early-exercise, isn't this a moot point? (if a given ISO permits exercise upon issue, since the value of a newly issued ISO must be zero, then this $100K cap is not an issue?) > In particular, under the current tax rules, the total aggregate fair value of ISOs that become exercisable for an individual employee for the first time within a calendar year may not exceed $100,000. ISOs that fail to…
Not everyone has $x00,000 to exercise options, turning them into illiquid shares in a company which may or may not ever exit. Basically, this: https://qz.com/455109/entrepreneurs-dont-have-a-special-gene...
Re: Proposed Tax Reform Stands to Impact Equity and Performance-Based Compensation
#8The tax bill is generally geared to screw over tech. In particular, eliminating the state income tax exemption will severely impact anyone in California. Are you still happy with #resisting anything the administration tries to do? Still happy you're censoring conservatives? Still happy Damore was fired? Still happy with your endless virtue-signaling? Still feeling good about enforcing political correctness? Still wan…
That is not true at all. Repealing AMT would be a HUGE boost to early stage startup employees.
Re: Proposed Tax Reform Stands to Impact Equity and Performance-Based Compensation
#9The tax bill is generally geared to screw over tech. In particular, eliminating the state income tax exemption will severely impact anyone in California. Are you still happy with #resisting anything the administration tries to do? Still happy you're censoring conservatives? Still happy Damore was fired? Still happy with your endless virtue-signaling? Still feeling good about enforcing political correctness? Still wan…
That is not true at all. Repealing AMT would be a HUGE boost to early stage startup employees.
Conservatives aren't trying to fuck over startups. They're trying to fuck over Google, Facebook, and Twitter. And rightfully so.
Repealing the AMT is just standard Republican elitist tax policy; that it benefits some small slice of tech is incidental.
Re: Proposed Tax Reform Stands to Impact Equity and Performance-Based Compensation
#10The tax bill is generally geared to screw over tech. In particular, eliminating the state income tax exemption will severely impact anyone in California. Are you still happy with #resisting anything the administration tries to do? Still happy you're censoring conservatives? Still happy Damore was fired? Still happy with your endless virtue-signaling? Still feeling good about enforcing political correctness? Still wan…
Yes, Yes, Yes, Yes, Yes, Yes, Yes