This CLE/CPE webinar will provide tax advisers with a practical guide to the deferral benefits of the new Section 83(i) Qualified Equity Grant election contained in the 2017 tax reform law. The panel will detail what constitutes a qualified grant of stock eligible for deferral treatment, discuss the mechanics of making the election, and describe the recent guidance issued in Notice 2018-9. The webinar will also detail potential drawbacks that firms and employees should consider when making the election.
New Section 83(i) allows eligible private companies to adopt qualified equity grant plans for issuing stock options or restricted stock units (RSUs) to eligible employees in exchange for the performance of services. A significant advantage of this election is that it requires no income tax payment when granted and allows the employee to defer income taxation for a period up to five years after vesting. Additionally, the vested stock immediately qualifies for long-term capital gains treatment.
Section 83(i) requires companies to offer equity grants to 80% of its eligible employees. Employers considering implementing a qualifying grant program face several additional administrative and potentially financial burdens, including meeting plan qualifications, complying with 83(i) notification requirements, and satisfying any applicable tax-withholding requirements.
Employee concerns include timely and appropriately making the election and paying the employment taxes at the time of the option or RSU grant. Recipients also face the possibility that the value of the stock will decrease during the deferral period.
Listen as the panel discusses the eligibility requirements under 83(i), the mechanics of making the election, and its risks and rewards.
- Basic elements of the Section 83(i) election
- Withholding and notice
- Possible pitfalls
- Notice 2018-97
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