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Don’t Tax Options and RSUs Upon Vesting

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Re: Don’t Tax Options and RSUs Upon Vesting

#81

Post by walshemj »

koolba wrote: post #9

> That should be a clear enough example to the lawmakers that vesting should not be a taxable event. Vesting has the unique property that before it occurs the shares are not yours and after it occurs, they clearly are (and can't be clawed back). If you don't tax vesting, are you going to instead wait until the shares are sold to tax them? That would be very easy to abuse. > If this provision becomes law, startup and…

Taxing on sale is farer or if say you get taxed on vesting and then 1 year later the company goes but do you get a tax refund I think not.

Re: Don’t Tax Options and RSUs Upon Vesting

#83

Post by sidlls »

I don't think I'd ever accept RSUs that I could not instruct my broker to liquidate to cover taxes immediately for. I'd either turn down the offer or require more cash salary instead. I've never worked in a place where RSUs weren't released simultaneously with vesting so that the broker could liquidate them for taxes on the gains realized by the value-at-vesting of the stock (the proceeds of the sale are also taxed).

As that's only applicable to publicly traded companies, I don't think this bill is a good idea. I think the start-up world's use of options and equity is not healthy, but there's a big difference between a person whose options/equity grants are a relatively small fraction of his compensation and true stakeholders/executives who have a significant fraction (often the majority of it) of their compensation in the form of equities. The tax code shouldn't treat these workers the same.

Re: Don’t Tax Options and RSUs Upon Vesting

#84

Post by neom »

iamcasen wrote: post #77
neom wrote: post #67

Earlier quoted context omitted.

no new money millionaires disrupting the status quo, please.

My thoughts exactly. There can't be any other reason for it.

I'm not even a tin foil hat kinda person, and I'm not nearly as paranoid as many about "the powers that be" - but I thought about it for almost an hour solid this morning and this is the only reasonable consolation I can come to. It's odd because it's actually massively stifling the economy to protect what killed the economy.

Re: Don’t Tax Options and RSUs Upon Vesting

#85

Post by noahdesu »

ihsw2 wrote: post #56
kyleblarson wrote: post #34

Earlier quoted context omitted.

It's already taxed whenever they exercise.

Well, perhaps increasing tax at exercise was politically untenable, but tax at vesting was. Just a hunch that they needed to grab from somewhere easy.

It is definitely easier to sell "oh this is just an esoteric part of the tax code that effects a small percentage of people. You know, we are just moving around when they pay taxes it's not like a tax increase or decrease".

Re: Don’t Tax Options and RSUs Upon Vesting

#86

Post by walshemj »

richardwhiuk wrote: post #63
seattle_spring wrote: post #15

Earlier quoted context omitted.

> I really doubt that. The talent pool, networks, and legal infrastructure in the USA are second to none. That's not going to suddenly shift because of minute changes to tax law. Working for a startup is already immensely risky. If there was a practically guaranteed bankruptcy risk as a result of appreciating stock options, no sane employee would work for a startup anymore-- they would all go work for the big compani…

Or startups could pay, you know, salary + bonus like the rest of the world?

That's not the point one of the reasons for Woking at a start up its to make FU money - and big companies also offer stock options not very few FTSE 100 companies don't have share schemes for their employees for example.

Re: Don’t Tax Options and RSUs Upon Vesting

#87

Post by walshemj »

saas_co_de wrote: post #27
ajmurmann wrote: post #13

Earlier quoted context omitted.

I can't overstate how sad it would be if the goal of this change was plainly to stick to to Democrat states. It there is truly do much disdain that didn't boat well for the future as a united country.

The entire tax bill seems to be sticking it to Democrat states, in particular New York and California, but it is really about urban vs. rural politics. Democrats have become too concentrated as a party in urban areas and so rural voters have gotten enough political power to attempt to address what they view as economic inequities in the current urban/rural income distribution. Republican have also flipped the script…

it aint the poorer rural middle class that's going to benefit here

Re: Don’t Tax Options and RSUs Upon Vesting

#88

Post by toast0 »

ihsw2 wrote: post #29
austenallred wrote: post #18

The importance of this change can’t be understated; this effectively kills compensation at startups in the form of equity, and would make startups completely unable to compete with incumbents. Anyone that has options at a company that grows quickly would be paying tens or hundreds of thousands in taxes to keep their equity, which is still effectively a very risky bet that a company will end up huge. No one would want…

While this is an unintended consequence, how do you otherwise tax the massive equity compensation packages offered to executives? It has to be across the board.

Honestly, this feels like an accounting trick to recognize taxes sooner. This helps the early year or years of the budget balance, at the determent of the later years, which usually don't count for budget scoring.

In this case, it also gives a fair number of people a bigger tax headache. In some cases, taxing earlier may mean future gains become capital gains when they may have been ordinary income; that's not good for tax revenue, even if you get some of it sooner.

Re: Don’t Tax Options and RSUs Upon Vesting

#89

Post by spullara »

The text of the bill specifically says that it is not intended to apply to statutory options (ISOs).

From page 123:

"However, it is intended that statutory options are not considered nonqualified deferred compensation for purposes of the proposal. An exception is provided for that portion of a plan consisting of a transfer of property described in section 83 (other than nonstatutory stock options), or a trust to which section 402(b) applies, or relating to statutory options under section 422 or 423 for which there is no disqualifying disposition."

Re: Don’t Tax Options and RSUs Upon Vesting

#90

Post by nerdsaresingle »

As a startup employee, I love this rule as this can help CEOs to go public sooner than later. Today VCs are the capitalist who take away all the growth of a tech stock till series’s D and then public pays a premium. If this rule leads startups to go public at 100Mish range instead of 2-10b, this could be great.
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