IRS Notice 2018-97: The IRS Requires Escrow Arrangement to Collect Income Withholding Taxes on Stock Deferral Elections
As part of the 2017 Tax Cuts and Jobs Act, Congress amended the tax code to add new Section 83(i), which allows employees of private companies to elect to defer the recognition of income on the receipt or vesting of stock, if the stock was received in connection with the performance of services and the employees received the stock as a result of the exercise of a stock option or the settlement of a restricted stock unit (RSU).
The availability of deferral treatment under Section 83(i) is conditioned on the existence of a written plan under which not less than 80 percent of a company’s employees are granted stock options or restricted stock units having the same rights and privileges to receive the stock. Other requirements are applicable, including a limitation on the ability of “excluded employees” to make the election. Excluded employees include (as determined under time periods specified in Section 83(i)) 1 percent owners, certain officers, and specified family members of certain officers.
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"IRS Notice 2018-97: The IRS Requires Escrow Arrangement to Collect Income Withholding Taxes on Stock Deferral Elections," by Daniel L. Morgan was published in Bloomberg Tax's Daily Tax Report on December 12, 2018.