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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

#61

Post by gonehome »

paulsutter wrote: post #3

Since 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…

A lot of larger private companies don't allow early exercise (and even if they did the strike price is often pretty high anyway).

The "become exercisable" language is ambiguous to me.

If you have ISOs that became exercisable in one year that at the time were less than 100k, but you didn't exercise them and they're now worth more than that they still remain ISOs right?

Would you still hit the 100k limit when you tried to exercise them if AMT is repealed or could you exercise all of them and delay the tax burden until you sell them?

If that's the case getting rid of AMT would be a big deal for people in private companies to actually be able to exercise their equity without paying a massive amount of taxes for something they can't liquidate easily.

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

#62

Post by rayiner »

clairity wrote: post #29
ajross wrote: post #18

Earlier quoted context omitted.

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…

you're right that it would be more fair to keep AMT, but that's only because of the complexity of the tax code with all of its deductions and loopholes. but i disagree that the tax plan is not designed to be dstructive. the bill is tax gerrymandering at it's finest--designed primarily to boost the republican party, it's cronies, and especcially trump himself, while punishing all others, including the poor and powerle…

> let's entirely remove the ability to move income and loss recognition through time for tax purposes

That would be incredibly stupid. It would mean that two companies could pay different amounts of tax over a given period simply based on whether they ran losses some years or booked consistent profits. Loss recognition through time isn't a crazy "loophole"--it's the mathematical byproduct of the fact that you're sampling a continuous variable at discrete intervals.

Likewise for moving income. There is no special loophole that allows you to "move income." It's a byproduct of the fact that the income tax taxes income, and not revenues.

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

#63

Post by delinka »

Tyrek wrote: post #60
delinka wrote: post #40

Earlier quoted context omitted.

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.

You need to have clauses to specify retroactivity, otherwise you get into a world where the government has to wait for everyone alive to die before they're allowed to implement a new taxation plan. There have to be limits somewhere, and that's exactly what these clauses need to implement.

"...has to wait for everyone alive to die..."

Certainly not. It's all based on the purchase/exercise/offering date. Let's take it to the extreme: if homicide had been legal, and society decided we needed to outlaw it, it stands to reason that homicide committed before the law was enacted would not be prosecuted, but only those cases happening one or after that date.

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

#64

Post by paulsutter »

gonehome wrote: post #61
paulsutter wrote: post #3

Since 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…

A lot of larger private companies don't allow early exercise (and even if they did the strike price is often pretty high anyway). The "become exercisable" language is ambiguous to me. If you have ISOs that became exercisable in one year that at the time were less than 100k, but you didn't exercise them and they're now worth more than that they still remain ISOs right? Would you still hit the 100k limit when you tried…

I would never work for a company that doesn't allow early exercise. Whether or not you plan to do it, you have to wonder about the attitude of those in charge if they don't allow early exercise.

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

#65

Post by sokoloff »

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?

Not necessarily. You could just take the standard deduction without regard to whether or not it was good for you to do so.

Many people are in the situation where they just know that there's no point in itemizing, and more will be in that boat when state/local income taxes are excluded and the standard deduction is raised.

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

#66

Post by sokoloff »

greenleafjacob wrote: post #41
ryandrake wrote: post #30

Earlier quoted context omitted.

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

If you have itemized before and no material changes have occurred in your tax situation then you don’t have to itemize again.

> If you have itemized before and no material changes have occurred in your tax situation then you don’t have to itemize again.

Explain this a bit more? I mean, it's technically true for most taxpayers that they aren't forced to itemize, but I doubt that's what you meant.

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

#67

Post by PrgsvThgt »

Personally happy to see that the new tax code appears to reduce the inequality between staff and executives, with regard to compensation and taxation. I'm a strong advocate for leveling the playing field for EVERYONE; because it eliminates (or reduces to the extent possible) the ability to negotiate these special options for "deferred" compensation.... for which the vast majority of us will never qualify.

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

#68

Post by loeg »

At least at my employer, the deferred compensation plan is only offered to high-level management employees ("Director" and above). So this doesn't seem to be a great loss for the average engineer.

If other people who are individual contributors, or even low level managers, have access to an employer deferred compensation plan (different from my experience), I would love to hear about it.

(As a highly paid engineer, I would totally make use of this deferred compensation scheme to lower my tax burden by smoothing out my income, if I could. But I've never been able to.)

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

#69

Post by fjsolwmv »

loeg wrote: post #68

At least at my employer, the deferred compensation plan is only offered to high-level management employees ("Director" and above). So this doesn't seem to be a great loss for the average engineer. If other people who are individual contributors, or even low level managers, have access to an employer deferred compensation plan (different from my experience), I would love to hear about it. (As a highly paid engineer, I…

At least one of AmaFooBookSoftLe offers deferred comp to all employees.

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

#70

Post by bousaid »

sctb wrote: post #19
throwgoog452 wrote: post #5

The 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…

We've banned this account for repeatedly violating the guidelines. This website is for substantive discussion—as in, actually saying something informative and not just chest-poking. https://news.ycombinator.com/newsguidelines.html

Thank you.
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