November 13, 2017
Lobbyists for so-called unicorns have persuaded Republicans in the House to allow private company employees to wait up to five years before owing taxes on stock option gains — but the Senate plan forces everyone to pay as soon as share grants vest.
The 400-plus-page House draft bill released November 2 by the House included a provision, 409B, that triggered taxation whenever any payment or award became vested for all companies, public and private.
Attorney Daniel Morgan of Blank Rome told MarketWatch in a phone interview that the beneficiaries of the deferral opportunity of private company illiquid shares are probably limited. “Mature start-ups have access to secondary markets where private company employees can cash shares. Early stage start-ups in many instances will find the requirements that they would have to satisfy to obtain the deferral unworkable.”
But Morgan said he was surprised about the restoration Thursday in the House bill of tax deferral opportunities for cash incentive bonuses. “It was a huge revenue raiser, and it seems unlikely that the companies and executives negatively impacted by the restoration would have focused on that aspect of the tax bill to complain about.”
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"Unicorn Lobby Pushes Back on Stock-Option Move in Republican Tax Bill," by Francine McKenna was published in MarketWatch on November 13, 2017.