The NASPP Blog

Last week, just a few days after election day, I blogged (“Post Election: Things to Watch Part 1,” November 11, 2016) about a couple of things to watch in the coming months post-election, namely possible changes to tax rates and the likely reintroduction of some variation of the Financial Choice Act. Since then, the blog-sphere has been electrified with commentary and comments on these topics, as well as a few new ones. Keep reading to find out how the conversation has evolved over the last week.

It turns out I am not alone in trying to figure out how a Trump presidency and Republican-dominated Congress will impact stock compensation. I’ve expanded our list of things to watch in 2017.

1. The Financial Choice Act is not just about repealing Dodd-Frank. In yesterday’s CorporateCounset.net blog (“The Financial Choice Act: One Provision Could Destroy the SEC’s Rulemaking Abilities“), Broc Romanek points us to Section 631 of the Financial Choice Act, which seems to be designed to reduce the independence of the SEC’s (and other agencies’) rulemaking.

SEC. 631. CONGRESSIONAL REVIEW. If the agency classified a rule as “major,” according to specified criteria, the rule would require a joint resolution of Congress to go into effect, unless the President finds that an emergency requires that it be effective (for 90 days). Congress would also have the right to disapprove certain non-major rules.

Romanek says “Read that provision again. A joint Congressional resolution to adopt a “major” rule – and even some non-major ones! It’s goal appears to be neutering the so-called “independent” federal agencies that govern our financial institutions & markets. Talk about putting partisan politics into “independent” agencies. And here I was worried that having Congress involved in the SEC’s budget process was too much meddling with a federal agency!”

2. Tax changes could mean an increase in the value of equity compensation. A myStockOptions.com blog (“What a Trump Presidency and Tax Changes Could Mean for Stock Compensation” – November 14, 2016) explores the various tax rates that could change under Trump’s proposed tax plan. Tax rates to watch include the Federal rate on ordinary income, the additional Medicare tax introduced under Obamacare, the future of Alternative Minimum Tax, and how supplemental withholding rates play into the picture. What does not appear to be (currently) on the table are changes that would affect the capital gain rates. myStockOptions.com points out that:

“Given the enormous federal budget deficit, the likely need for 60 votes in the Senate to defeat a filibuster and pass a major tax overhaul, and Trump’s inexperience in the art of political compromise, there are no guarantees that these proposals will become law.”

Additionally, since it’s not highly likely that these tax proposals will come to fruition in time to take effect for the 2017 tax year, myStockOptions.com suggests that plan participants need not take a rushed approach to pulling in stock compensation transactions to 2016 (whew! hopefully that reduces the likelihood of a bunch of stock plan transactions over the holidays close to year-end).

“In the short term, with little risk of tax increases in 2017, there is no pressing tax-law reason to accelerate income into 2016. Even if you do predict that your tax rates are likely to drop or rise in the future, taxes should never be the only planning consideration for stock options and company stock at year-end. Instead, you may want to let investment objectives and personal financial needs, not tax considerations, drive your year-end planning.”

3. President-elect Trump is no stranger to stock compensation. Are you at all curious about whether or not Trump understands stock compensation? The staff at myStockOptions.com did an analysis of public filings to determine his past affiliations with stock plans. It turns out at least some of his companies have adopted stock plans, and he has personally been a recipient of stock options under at least one of those plans. For the complete analysis and commentary, check out “What a Trump Presidency and Tax Changes Could Mean for Stock Compensation” – myStockOptions.com, November 14, 2016).

If anything, 2017 promises to be a year of changes. When changes occurs, we often communicate about it by blog early on. To be notified about new information on topics such as these, be sure to subscribe to The NASPP Blog.

-Jenn