This is our Fall 2017 Newsletter. Sign up for our mailing list to receive these quarterly updates!
Please note: This is an update on the bill as it was in process. Please see our later posts for the final outcomes on these points!
Hello Startup Community!
The Senate and House have each passed tax reform bills that include provisions related to startup equity. When they pass a final bill, I will send an update on how it affects individuals in the startup community. As of today:
Final Deal Before Christmas? Congress is working to reconcile the Senate and House versions before Christmas. The Wall Street Journal reported today that House and Senate Republicans have agreed on the final version and expect to vote next week.
Tax-Deferral for Stock Option Exercise? Both the Senate and House versions include a tax-deferral opportunity for certain startup employees who exercise stock options or settle RSUs before they have liquidity for the shares. However, the rules are quite restrictive and not well-aligned with the current practices of most startups, so this is not likely to be a benefit for most startup employees who have outstanding stock options.
Eliminate AMT? The House bill would eliminate the Alternative Minimum Tax for individuals. If this is part of the final bill, it would allow for tax-free exercise of Incentive Stock Options. The House bill also modifies the timing for use of existing AMT tax credits.
Restrictions on Sale of Stock? The Senate's bill also included a first-in, first-out rule for stock sales. This would affect startup stockholders who participate in secondary sales or tender offers and those who sell stock after an IPO. It could limit their planning opportunities for tax-deferral and Qualified Small Business Stock exclusions.
Stock Option Counsel, P.C. - Legal Services for Individuals
Thank you for your enthusiasm for my practice and the Stock Option Counsel Blog. I will continue to send quarterly updates on important topics in the market for startup equity for individual founders, executives and employees. Please keep in touch.
Mary Russell | Attorney and Founder
Stock Option Counsel, P.C. | Legal Services for Individuals
Stock Option Counsel, P.C. - Legal Services for Individuals. Attorney Mary Russell counsels individuals on equity grants, executive compensation design, employment agreements and acquisition terms. She also counsels founders on their personal interests at incorporation, financings and exit events. Please see this FAQ about her services or contact her at (650) 326-3412 or by email.