ESPP and 162 (m)

[Guest M Treider]

If an Employee Stock Purchase Plan allows for a 15% discount purchase price, is the discount value considered in evaluating the Section 162 (m) compensation threshholds?

[Guest svatty]

I don't believe so ..... just off the top of my head I think the ESPP may satisfy the "performance based compensation" exception and in any event, the company generally doesn't take a deduction for these amounts anyway unless and until the participant makes a Disqualifying Disposition ....

[Guest M Treider]

Thanks for your quick response.

The only issue I have with classifying these awards as "performance-based" is the lack of established goals.

Our performance-based awards are subject to forfieture if pre-defined goals are not achieved. That scenario does not hold true with the ESPP.

Any comments are welcome.

[Guest svatty]

No .. you are right .... if it is a Disqualifying Disposition such that the Company can take a deduction for the ESPP transaction then the 15% spread is compensation which may be limited by the 1 million deductibility of 162(m) .... the typical 423 ESPP would not qualify as performance based compensaiton exception .... my fault ....