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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

#31

Post by clairity »

glymor wrote: post #28

> Similarly, awards with vesting triggers based on exit events such as an initial public offering or change-in-control would be taxable on grant unless they require the recipient to be employed through the liquidity date Double trigger RSUs are popular in late stage unicorns where the exercise price for ISOs have already hit a high level but the stock isn't liquid enough to sell to cover the tax as they vest. A lot o…

there is a section in the document called "Grandfathering of Compensation Earned Prior to 2018" =)

Re: Proposed Tax Reform Stands to Impact Equity and Performance-Based Compensation

#33

Post by dpiers »

morgante wrote: post #26
dpiers wrote: post #24

Earlier quoted context omitted.

ISOs are priced at the 409a value, which can be 1/10th of the preferred share price. Generally speaking, the 409a value converges with the preferred price as the company is de-risked and moves closer to IPO.

Right, but for later-stage startups I can certainly imagine average employees hitting the exercise cap.

Most companies move to RSUs by the time typical employees would hit the exercise cap.

Re: Proposed Tax Reform Stands to Impact Equity and Performance-Based Compensation

#34

Post by guelo »

ajross wrote: post #18
shmerl wrote: post #11

> 409B does not appear to impact the taxation of incentive stock options (ISOs), which in conjunction with the repeal of the alternative minimum tax, would make ISOs more valuable So AMT is being repealed now?

Yes, which is sort of a shame. Frankly if you were serious about simplifying the tax code and reducing unfairness and asymmetry, you'd keep the AMT and throw out the existing income tax. But whatever: the AMT is an issue for upper middle class taxpayers, and particularly ones (like tech employees, and most particularly startup employees) who see lots of their income in big chunks like stock grants and option exercise…

> the economy is growing and deficits are shrinking, which is exactly where you'd want them.

Would really love to hear your theory on this. Tax cuts are always sold as economy boosters, and the fed is raising rates now to try to be countercyclical. So your idea doesn't match most economic theories I've heard of.

Re: Proposed Tax Reform Stands to Impact Equity and Performance-Based Compensation

#35

Post by CalChris »

ajross wrote: post #18
shmerl wrote: post #11

> 409B does not appear to impact the taxation of incentive stock options (ISOs), which in conjunction with the repeal of the alternative minimum tax, would make ISOs more valuable So AMT is being repealed now?

Yes, which is sort of a shame. Frankly if you were serious about simplifying the tax code and reducing unfairness and asymmetry, you'd keep the AMT and throw out the existing income tax. But whatever: the AMT is an issue for upper middle class taxpayers, and particularly ones (like tech employees, and most particularly startup employees) who see lots of their income in big chunks like stock grants and option exercise…

> These are relatively modest tax cut bills arriving at a time where the economy is growing and deficits are shrinking, which is exactly where you'd want them.

So you want to cut taxes and increase deficits during growth times? This is, of course, not just different but exactly the opposite of Keynesianism. What is it that you plan to do during recessions? Cut spending and increase taxes to close your deficit?

This is insanity.

Re: Proposed Tax Reform Stands to Impact Equity and Performance-Based Compensation

#36

Post by weaksauce »

clairity wrote: post #31
glymor wrote: post #28

> Similarly, awards with vesting triggers based on exit events such as an initial public offering or change-in-control would be taxable on grant unless they require the recipient to be employed through the liquidity date Double trigger RSUs are popular in late stage unicorns where the exercise price for ISOs have already hit a high level but the stock isn't liquid enough to sell to cover the tax as they vest. A lot o…

there is a section in the document called "Grandfathering of Compensation Earned Prior to 2018" =)

These grandfather clauses irk me... if the policy is not good enough to stand on its own then it should not be policy.

Re: Proposed Tax Reform Stands to Impact Equity and Performance-Based Compensation

#37

Post by [deleted] »

ryandrake wrote: post #30
colek42 wrote: post #27

Earlier quoted context omitted.

The standard deduction doubling will mean that most people will be able to use a simple form rather than itemizing.

Regardless of what the standard deduction is, don't you still have to first itemize in order to figure out whether you should itemize?

[deleted]

Re: Proposed Tax Reform Stands to Impact Equity and Performance-Based Compensation

#38

Post by apendleton »

weaksauce wrote: post #36
clairity wrote: post #31

Earlier quoted context omitted.

there is a section in the document called "Grandfathering of Compensation Earned Prior to 2018" =)

These grandfather clauses irk me... if the policy is not good enough to stand on its own then it should not be policy.

Without speaking to this particular grandfather clause, I think in general these kinds of clauses deal with the fact that a new policy, good or bad, might cause people to design their incentive structures differently, and they want to avoid screwing over people who in good faith designed their structures to work best under the old system, and instead give them time to make adjustments.

Re: Proposed Tax Reform Stands to Impact Equity and Performance-Based Compensation

#39

Post by wpietri »

weaksauce wrote: post #36
clairity wrote: post #31

Earlier quoted context omitted.

there is a section in the document called "Grandfathering of Compensation Earned Prior to 2018" =)

These grandfather clauses irk me... if the policy is not good enough to stand on its own then it should not be policy.

Not at all. It's a recognition that the people who made long-term arrangements under the old law shouldn't be punished for that. The safer people feel making commitments, the more we can pursue things that take time to pay off, which has broad societal benefits. And in practice, laws are much harder to change if you piss off a lot of people who didn't do anything wrong but now suddenly stand to lose big.

As an example, take the mortgage interest tax credit. Personally, I strongly believe it should go away; if the government is going to subsidize housing, it shouldn't spend most of that money on the already well off. But I think it would be wrong to screw all the homeowners who bought a house expecting the credit. We'd see a wave of disruption (short sales, foreclosures, people suddenly barely scraping by) that benefits nobody. So I'm fine with grandfathering existing mortgages and gradually phasing out the credit.

Re: Proposed Tax Reform Stands to Impact Equity and Performance-Based Compensation

#40

Post by delinka »

weaksauce wrote: post #36
clairity wrote: post #31

Earlier quoted context omitted.

there is a section in the document called "Grandfathering of Compensation Earned Prior to 2018" =)

These grandfather clauses irk me... if the policy is not good enough to stand on its own then it should not be policy.

New laws shouldn't, in general, be retroactive. The fact that a grandfather clause is necessary to specify that a law isn't intended to be retroactive is bothersome.
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