The 23rd Annual NASPP Conference is just 21 days away and, as is the case every year, I am so excited about it I can hardly contain myself! It’s always energizing to reconnect with colleagues and catch up on industry developments. And this year, we have a lot of new and innovative programs planned, as noted in my column in the most recent issue of the NASPP Advisor. It’s going to be a whole new experience!
I have a long list of sessions I hope to get to at the Conference (or to listen to audio recordings of afterwards); for today’s entry I highlight just five of them.
Family Feud–NASPP Style: This keynote, in which our contestants will try to guess the results of our poll on hot topics in executive and equity compensation (a la Family Feud), promises to be fascinating. We’ve put together a great panel of experts, but will their answers align with the popular vote? It’s going to be a lively, fun, and interesting session.
Decisions, Decisions: Offering Employee Choice Plans: I am asked about programs in which employees are allowed to choose their own equity awards with some frequency, but I rarely encounter companies that do this. I’m excited to hear how two companies (3M and Coach) use employee choice programs.
FTCs, TEQs, IAPs, Oh My! Learn to Speak Mobility: Finally, a session that will explain all the mobility terminology that I find so confusing! I expect to leave with a much better understanding of all the issues involved in mobile employees.
The IRS and Treasury Speak: This might seem like an odd choice what with ASC 718 and Dodd-Frank rulemaking overshadowing tax rulemaking in the past year, but we’ve asked the panel to cover some nagging unanswered questions on stock compensation and I’m excited (and maybe a little nervous) to hear what the panel has to say about them.
Choose Your Own Adventure: Audience-Driven Hot Topics: And, of course, I’m looking forward to my own session. This will be a great run-down of today’s hottest topics in a very innovative an interactive format. We are doing the session twice and each iteration could be completely different. My only regret is that I wasn’t able to sneak a video of my cat into the slide deck (but if anyone wants to see it, I’ll be happy to show it to you).
The 23rd Annual NASPP Conference will be held from October 27-30 in San Diego. I’m looking forward to seeing all of you there! If you haven’t registered yet, don’t wait any longer.
– Barbara
Tags: NASPP Conference
Here’s what’s happening at your local NASPP chapter this week:
Chicago: David Yang and Michael Kenney of Frederic W. Cook & Co. present “CEO Pay Ratio: Now What?” (Thursday, October 8, 7:30 AM)
NY/NJ: Kelly Malafis and Melissa Burek of Compensation Advisory Partners present “Long-Term Incentive Plans and Current Issues Impacting Design Considerations.” (Friday, October 9, 8:30 AM)
Tags: NASPP chapter meetings
We’re into fall already, and before we know it the end of the year will be upon us. This upcoming period of time is a busy one for stock administration professionals. In the mix of activity that tends to spike in the month of December is that of charitable giving and gifts. In today’s blog I’ll cover some reminders about ensuring proper tax reporting and securities law compliance for stock related donations.
My inspiration for this blog actually came from a Fortune magazine article about John Mackey, co-CEO and co-founder of Whole Foods. Only a single sentence in the entire article mentioned stock options. In talking about Mackey’s $1 per year salary, the article also mentioned that “The company donates stock options Mackey would have received to one of its foundations.” As I started thinking about how that transaction would be handled on the company side, I realized that it’s been a while since we talked about gifts and donations.
This is honestly a topic that could command a lot of written coverage. The intricacies of gifting stock can be complex from several angles. In the interest of space, I’ll focus on a few areas that touch stock administration.
Timing of Donation to Charity: For tax purposes, the IRS considers the charitable donation to be complete on the date it is received by the charity – not the date it was requested, not the date the company approved the transfer. This is something to be mindful of the closer the request is made to December 31st. If the donor personally delivers a stock certificate with all necessary endorsements to the charitable recipient, the gift is complete for federal income tax purposes on the day of delivery. If the shares are being transferred electronically to the charity, then the transfer is complete when the shares are received into the charity’s account. It’s not enough to have made a transfer request to a broker. This timing can be important to companies who are tracking dispositions of ESPP shares and ISOs. For dispositions due to charitable donations occurring near December 31st, it’s best to verify the date the shares were actually received by the charity in order to apply the disposition to the proper tax year.
Donations of shares acquired through an ESPP or Incentive Stock Option (ISO) exercise: There are some tricky nuances around taxation on the participant side that hopefully will have been discussed with their tax advisor. What stock administrators need to know is that in tracking dispositions of ESPP and ISO shares, a disposition is a disposition – even a charitable one. That means for purposes of tracking qualified vs. disqualified dispositions, the same rules apply to charitable donations of the shares. See the above section on “Timing of Donation to Charity” to ensure tax reporting in the proper year.
Rule 144 Considerations: Rule 144 is concerned with the sale of control securities, not their gratuitous transfer, so the subsequent sale of the stock by a charity, not the actual gift of the shares to the charity, would be subject to the restrictions of Rule 144, if it is applicable. The charity must follow Rule 144 if it has a control relationship with the issuing company. Those wanting more detail on Rule 144 and gift requirements can read the March-April 2013 issue of The Corporate Counsel.
In summary, if an affiliate gifts stock to a non-affiliate that was originally acquired by the affiliate in the open market (i.e., not restricted in the affiliate’s hands), since the securities were not subject to a holding period requirement in the affiliate donor’s hand, SEC staff has stated that the donee need not comply with the Rule 144(d) holding period requirement for its sales of the securities. Moreover, the Staff notes that if the donee is not an affiliate and has not been an affiliate during the preceding three months, then the donee is free to resell the securities under Rule 144(b)(1) “subject only to the current public information requirement in Rule 144(c)(1), as applicable.”
“The one-year cut off for the application of the current public information requirement to donees does run from the donor’s original acquisition. Good news—but don’t forget that the six-month “tail,” adopted in 2007 (which requires donors to aggregate with their donees’ sales) runs from the date of the gift.” The “tail” mentioned in the article applies to the donor, who must aggregate his/her sales of stock with those of the donee for purposes of complying with the Rule 144 volume limitation. This requirement applies for six months after the gift (12 months where the issuer is not a reporting company or is not current in its Exchange Act reporting).
If you are not a subscriber to The Corporate Counsel (or have not yet renewed) you can gain immediate access online to sample gift compliance letters by taking advantage of the no-risk trial. (Almost all of our member companies and law firms are long-term subscribers to The Corporate Counsel.)
-Jenn
Tags: Charitable, Disqualifying Disposition, Donation, ESPP, Gift, Gift Tax, ISO, Qualified Disposition, Rule 144