July 6, 2017
Tax Revenue Down Due to Delayed Transactions
Have you noticed that your employees have been a little quiet lately? Have stock option exercises been down? Fewer sales to report on Form 4 for Section 16 insiders? It could be that employees and executives are delaying their stock plan transactions in the hopes of a tax cut.
Recent articles in Reuters (“U.S. Tax Cut Hopes Sent State Collections Down in April,” May 20) and The Washington Times (“Treasury Revenue Falls as Taxpayers Anticipate Republican Rate Cuts, Shift Income to Next Year,” June 18) report that taxpayers may be delaying income in the hopes of a GOP tax cut.
Stock Plan Transactions May Be Delayed
And where your employees are looking to delay income, stock plan transactions are a prime candidate. It’s hard to delay salary and most other forms of cash compensation; even if your company offers a salary or bonus deferral program, under Section 409A, elections to defer have to be made well in advance. But employees can easily choose to delay option exercises and sales of stock.
Impact to the Company
In the short term, the impact may be that you are a little less busy, with fewer exercises to process and Section 16 insider sales to report. But, come the end of the year, this could reduce the company’s tax deduction. Fewer option exercises and fewer disqualifying dispositions will likely mean a smaller tax deduction for your company.
– Barbara