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As discussed in our December 16, 2010 Executive Compensation Law Blog article, the IRS issued final regulations in 2009 under Section 6039 of the Internal Revenue Code (the “Code”) that require employers to annually furnish each employee who exercised incentive stock options (“ISOs”) or sold or otherwise transferred shares acquired under an employee stock purchase plan (“ESPP”) during a year with a detailed information statement by January 31 of the following year. In addition, employers must generally file an information return with the IRS by February 28 of the following year, or by March 31 for employers filing electronically.
Continue Reading Reminder to Perform Annual ISO/ESPP Reporting in January 2020

On June 21, 2018, the United States Supreme Court issued its decision in South Dakota v. Wayfair, Inc., overturning a 26 year-old decision holding that a retailer must have a physical presence in a state in order to have a sales or use tax collection obligation. The Wayfair decision has an immediate and major impact on retailers of all sizes, but also leaves open numerous unanswered questions.
Continue Reading Monumental Shift in Sales Tax Collection Requirements for Remote Retailers

On Friday October 3, 2013, Governor Brown signed into law AB 1412, which provides full relief for individuals affected by the decision in Cutler v. Franchise Tax Board, where the California Court of Appeal held that the California tax incentives relating to the sale of qualified small business stock discriminated against interstate commerce and were therefore unconstitutional.
Continue Reading California Tax Relief for Sellers of Qualified Small Business Stock

Final regulations were issued last month under IRC Section 336(e). These regulations present beneficial planning opportunities in certain circumstances.

For qualifying transactions occurring on or after May 15, 2013, Section 336(e) allows certain taxpayers to elect to treat the sale, exchange or distribution of corporate stock as an asset sale, much like a Section 338(h)(10) election. An asset sale can be of great benefit to the purchaser of the stock, since the basis of the target corporation’s assets would be stepped up to their fair market value.Continue Reading Final Section 336(e) Regulations Allow Step-Up in Asset Tax Basis in Certain Stock Acquisitions

The California State Senate yesterday approved a measure providing relief (albeit only partial relief) to those taxpayers facing retroactive tax assessments by reason of the Cutler decision. In Cutler v. Franchise Tax Board the California Court of Appeal held that the California tax incentives relating to the sale of qualified small business stock discriminated against interstate commerce and were therefore unconstitutional.
Continue Reading California State Senate Passes Measure Providing Partial Relief From Cutler Decision (re: QSBS)

By Matthew Richardson

A California appellate court recently held as unconstitutional the California statutes extending the benefits of selling “qualified small business stock” (QSBS) to California taxpayers. In Cutler v. Franchise Tax Board (2012) 208 Cal. App. 4th 1247, the court held that the QSBS exclusion and deferral statutes – California Rev. & Tx. Cd. §§ 18038.5 and 18152.5 – discriminated against non-California corporations and therefore violated the Commerce Clause of the U.S. Constitution.Continue Reading FTB issues Notice to Retroactively Deny “Qualified Small Business Stock” Tax Benefits. Amended Returns Should be Filed.

By Matthew Richardson

Beginning this year, according to forms or regulations the IRS prescribes, any issuer of a “specified security” will have to file an information return setting forth:

  1. a description of any organizational action (occurring after December 31, 2010) that affects the basis of the specified security of the issuer;
  2. the quantitative effect on the specified security’s basis resulting from the organizational action; and
  3. any other information IRS may prescribe.

Continue Reading New IRS Reporting Rules for Stock Splits, Mergers and Acquisitions

By Matthew Richardson

Included in the Tax Relief, Unemployment Insurance Reauthorization, and Job Creation Act of 2010 signed into law on December 17, 2010, a tax incentive relating to qualified small business stock (“QSBS”) was extended for another twelve months.  Pursuant to this extension, noncorporate taxpayers are allowed to exclude all (100%) of their gain from the sale or exchange of  QSBS (subject to  a variety of special rules), provided that the stock is acquired after September 27, 2010 and before January 1, 2012.  The gain exclusion provision only applies to QSBS held for more than five years.  The amount of gain from the sale of QSBS that can be excluded by a taxpayer is generally limited to the greater of $10,000,000 (in the aggregate) or 10 times the tax basis of the QSBS sold.  Generally speaking, and with a few exceptions, QSBS must be acquired when it is issued in exchange for money, property (other than stock) or services.Continue Reading Extension of 100% Gain Exclusion for Qualified Small Business Stock