Which Tax Law Is Really Hurting Silicon Valley?

Silicon Valley is known for a lot of things. Some of the world’s greatest technological advances and ideas have come from companies located in the Silicon Valley. Likewise, some of the world’s most innovative and largest companies were born in Silicon Valley and still call it home today. Many people have found great success and riches in Silicon Valley, including many employees who helped build companies from the ground up.
There is a big problem, though, for many of these kinds of employees. There is a tax provision that is really hurting people who have worked for many years for start-ups or newer companies and have helped them become successful and valuable companies. However, when it coms time for many of these employees to leave their job or simply to cash out their stock options, they can’t really afford to pay the required cash outlay.
This problem should have been fixed when companies were allowed to give employees incentive stock options. However, in 1982, Congress changed that rule when it turned exercising an incentive stock option into a tax preference as part of the AMT. That meant any gain on the exercise of incentive stock was now taxed. This is very problematic for any employee in this boat, which is having a hard time exercising his or her options. In some cases, even if they can’t sell the stock, some employees end up owing tax on phantom income but they have no money to pay for it.
This tax provision is clearly causing problem for many people who have helped make Silicon Valley what it is today. And it’s a problem that the government should fix.
Business Valuation Experience
Business Valuation Experience Valuation Services Valuation Process Sample Report Glossary of Terms The Business Valuations group at Greenstein Rogoff Olsen & Co provides the expertise of a large big four firm with the hands on individualized service of a small local firm. We are committed to provide our clients and their advisors with the highest…
Stock Option
Stock Option Valuation Services Valuation Process Valuation Experience Sample Report Glossary of Terms It is extremely important in today’s regulatory environment that stock options are managed correctly, which includes all the various valuation issues that surround options. Because of this, the valuation analyst must have a working knowledge of stock option plans, in addition…
IRS Extension 409A
IRS Extension 409A The IRS has issued Notice 2007-86 which delay the effective date of the Proposed Regs under Section 409A until January 1, 2009 and by generally extending earlier transitional relief. This provides taxpayers additional transitional relief to come into compliance with forthcoming final regs. Options granted before 2009 won’t be considered as violating…
ESOP Valuation Issues
ESOP Valuation Issues Q&A (Employee Stock Ownership Plan) Valuation Services Valuation Process Valuation Experience Sample Report Glossary of Terms ESOPs have become an effective tool in corporate finance and tax planning. Not only do they provide retirement benefits and incentives to employees but an ESOP can provide unique ways to transition company management in tax…