Just used ResistBot.io (full disclosure, a friend's business) to message my representatives about this.
May not be as effective as calling - but certainly quick/easy.
Don’t Tax Options and RSUs Upon Vesting
201–210 of 388 posts
Re: Don’t Tax Options and RSUs Upon Vesting
#202Earlier quoted context omitted.
That's just it. Where I am, I don't see new companies building anything . YC isn't here . I'd love to work for a startup with a like-brand-X-but-for-Y or a word-salad elevator pitch, that also offered a compensation package as good as any found in Silicon Valley. But I don't get options or RSUs, or even cash bonuses. I get billed to a customer at $200-$400/hr and get maybe $50-$60 of that in total compensation. It's…
You don't like what some of the startups in the current age are focusing on, so you want disincentivize all startups in general, for perpetuity? That's an incredibly extreme response. Throwing the baby out with the bathwater, if I've ever seen it.
More like throwing out someone else's ugly ogre baby with the mud wallow.
I most definitely want to disincentivize startups that lure people that likely don't yet know any better to move to one of the highest cost-of-living markets in the world, to work long hours in exchange for empty promises and unicorn-lottery tickets. If you actually need top talent, you can pay for it with cash. If you can't get enough cash to pay for it, that might be because investors don't believe you can do what you say you can do, and they might be right.
There are plenty of startups that don't resort to flimflammery to attract employees, and many of them are forced to bootstrap on slim margins and angels because their model will never make them a unicorn, and certain types of investor are only attracted to the high-risk, high-reward ventures. That may be because the rules around the current system provide additional incentives to have that preference. Changing the rules might change the preference.
It is my personal preference that businesses that quietly fill a niche and make money from day 1 be preferred over those that burn their solid rocket booster at both ends, only to make big flashy explosions that do nothing and go nowhere. But I lack the funds and the risk tolerance to enforce my preference, so it doesn't really matter to the markets at all. But I still have one vote worth of political power, whenever that actually matters.
Re: Don’t Tax Options and RSUs Upon Vesting
#203I'm a little confused about the mechanism here because the author doesn't explain what's going on or how, or cite any sources. I thought RSUs were already taxable immediately upon vesting. But admittedly I'm not deep into Valley compensation culture. What's changing here?
Re: Don’t Tax Options and RSUs Upon Vesting
#204I'm going to say something that may be unpopular. Hopefully my karma can handle it. The latest analysis I saw of this from Fenwick says that this is only applying to non-qualified stock options. Employees get NSOs when you vest too much to get ISOs in a calendar year, based on the vesting schedule and value at the time of grant, not fair market value at time of vesting of the option. That limit is $100K, for people w…
You seem to be bringing up a really good point. From reading the article earlier, I was under the false impression that this applies to ISO's too but looks like it only applies to NSO's. What about non-public RSU's for late stage startups like Uber, Airbnb etc?
Re: Don’t Tax Options and RSUs Upon Vesting
#205I'm going to say something that may be unpopular. Hopefully my karma can handle it. The latest analysis I saw of this from Fenwick says that this is only applying to non-qualified stock options. Employees get NSOs when you vest too much to get ISOs in a calendar year, based on the vesting schedule and value at the time of grant, not fair market value at time of vesting of the option. That limit is $100K, for people w…
It depends a lot on the pricing of that $100K. If that's based on price at time of vesting you run into big problems -- that's not how ISO's work currently but it's unclear exactly what is going to change in this bill. Say you get $50K/year in stock at the valuation based on the time you join the start-up and the start-up has on paper 10X growth in 2 years. In your 3rd year, your $50K of stock is $500K on paper so the last $400K would be over the $100K limit and immediately taxable even though you cannot sell the stock yet. If the tax is setup to make $100K of value at time of employment contract exempt from taxing as ISO's, then the problem is far smaller as the tax events are predictible and manageable.
Re: Don’t Tax Options and RSUs Upon Vesting
#206I'm going to say something that may be unpopular. Hopefully my karma can handle it. The latest analysis I saw of this from Fenwick says that this is only applying to non-qualified stock options. Employees get NSOs when you vest too much to get ISOs in a calendar year, based on the vesting schedule and value at the time of grant, not fair market value at time of vesting of the option. That limit is $100K, for people w…
Per the article and my understanding from other secondary sources, the tax-at-vest clause applies to RSUs as well as NQSOs. RSUs are frequently issued by companies that do not have a liquid market. So, tax-at-vest is still problematic for that class of employee compensation.
Re: Don’t Tax Options and RSUs Upon Vesting
#207Earlier quoted context omitted.
> the goal of this change was plainly to stick to to Democrat states That's not the goal but a predictable side effect of a single party emerging with dominance from close to a decade of structural gridlock. Republicans want to give their base, both donor and electoral, a tax cut. The national debt scares many of their constituents. As a result, they have to at least look like they're trying to avoid blowing the defi…
It also bears mentioning that some of the proposals in the current plan are surprisingly well-considered. Also, it's not like all of it even hews to traditional republican orthodoxy. A few things I've read: - Removing state exemptions. This concentrates more control at the federal level and is anti-states' rights which is arguably anti-Republican. - Mortgage interest deduction removal/lowering the cap. Economists lef…
Here's The Economist on this tax bill:
https://www.economist.com/news/leaders/21731166-house-republ...
tl;dr: it's bad, but includes a few good things, and could potentially be improved.
Re: Don’t Tax Options and RSUs Upon Vesting
#208Earlier quoted context omitted.
> No one would want options anymore, which would make it impossible for startups to compete with large, cash-rich incumbents. You're right; nobody would want options. So we have to start paying people in actual shares if we want to give equity. Which means you have to give employees way more of the company than deep-pocketed investment bankers who will still invest -- despite their temper tantrums to the contrary --…
> So we have to start paying people in actual shares if we want to give equity This is also a big gamble if you're given shares in a non-public company. You pay taxes on these shares at vesting - not only have you reduced your liquidity until IPO/exit, but these shares could end up being worth nothing if the company fails.
That's true if the system continues to work as it does today, yes. But I think the entire model of venture finance is changing towards crypto anyway, making most of these specific points moot. Crypto assets will have different regulations in some form; so I think we should look to shape regulations around cryptocurrency rather than try to cling to an outdated funding model and its associated tax dodges.
Does anyone have data on the number/size of round A funding events vs ICO funding? I have a suspicion we're seeing a transfer from one into the other.
Re: Don’t Tax Options and RSUs Upon Vesting
#209I've had a similar tax issue which caused a few 100k in taxes on unrealized gains. That was not a happy day and I could barely pay the tax bill. In my case the issue involved moving from The Netherlands to the US. As far as I know the US is one of the only countries which taxes unrealized gains. In The Netherlands you only get taxed once you actually make the money. The VC industry is world class here in the US, but…
There is a provision in the House version of the tax bill to not tax the exercising of options until there is a liquidity event. In that case you wouldn't be taxed on the unrealized gain until you could sell the stock.
I still think with options it should be as you've pointed out a tax-free event until you actually sell the equity for cash.
Re: Don’t Tax Options and RSUs Upon Vesting
#210Earlier quoted context omitted.
Maybe an employee believes in the company and wants to take part, deeming the risk is worth it for them? Clearly that's what's happening. It's certainly rational in some cases to take the risk of owning a portion of a company instead of taking the same amount of cash and putting it in the S&P 500. You're always investing your time and money, it's just a matter of where. And for what it's worth, if you're getting paid…
"Maybe an employee believes in the company and wants to take part, deeming the risk is worth it for them? Clearly that's what's happening." And that belief is abused, and the employees get fucked over when it comes time for an acquisition, as their shares get dilluted to hell and back.
Yes, that often happens and it's clearly unethical. What's your point?