Overview of the Taxation of Equity Compensation Awards

Resource type: Practice note

Status: Maintained

Jurisdiction: USA

An overview of the US federal tax consequences of various types of equity compensation awards granted by employers to their employees and other service providers. Awards covered include incentive stock options, non-qualified stock options, stock appreciation rights, restricted stock and restricted stock units. This note also includes a brief overview of Sections 83, 422, 409A and 162(m) of the Internal Revenue Code.

PLC Employee Benefits & Executive Compensation

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Resource ID: 7-505-9204
Products: PLC US Employee Benefits & Executive Compensation, PLC US Law Department
This resource is maintained, meaning that we monitor developments on a regular basis and update it as soon as possible.

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Related content

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Practice note: overview

Section 409A: Deferred Compensation Tax Rules: Overview Section 409A: Deferred Compensation Tax Rules: Overview (http://uk.practicallaw.com/topic6-501-2009)

Practice notes

Drafting an Equity Incentive Plan for a Public Company Drafting an Equity Incentive Plan for a Public Company (http://uk.practicallaw.com/topic0-509-2202)
Global Equity Plans Global Equity Plans (http://uk.practicallaw.com/topic4-520-5612)
Payroll (FICA) Taxes Payroll (FICA) Taxes (http://uk.practicallaw.com/topic1-512-7630)
Section 162(m): Limit on Compensation Section 162(m): Limit on Compensation (http://uk.practicallaw.com/topic7-501-5106)
Stock Option Repricing and Exchange Programs Stock Option Repricing and Exchange Programs (http://uk.practicallaw.com/topic1-502-3086)
Stock Options and Other Equity Compensation Stock Options and Other Equity Compensation (http://uk.practicallaw.com/topic0-501-9297)
Treatment of Equity Compensation Awards in Mergers and Acquisitions Treatment of Equity Compensation Awards in Mergers and Acquisitions (http://uk.practicallaw.com/topic0-517-3496)

Standard documents

Annual Cash Bonus Plan Annual Cash Bonus Plan (http://uk.practicallaw.com/topic2-507-0586)
Equity Incentive Plan Equity Incentive Plan (http://uk.practicallaw.com/topic8-507-0913)
Incentive Stock Option Agreement Incentive Stock Option Agreement (http://uk.practicallaw.com/topic9-508-6490)
Internal Revenue Code Section 83(b) Election Internal Revenue Code Section 83(b) Election (http://uk.practicallaw.com/topic3-518-4832)
Non-qualified Stock Option Agreement (Employees) Non-qualified Stock Option Agreement (Employees) (http://uk.practicallaw.com/topic7-507-5708)
Non-qualified Stock Option Agreement (Non-employee Directors) Non-qualified Stock Option Agreement (Non-employee Directors) (http://uk.practicallaw.com/topic3-525-2406)
Performance Share Unit Agreement Performance Share Unit Agreement (http://uk.practicallaw.com/topic4-518-9023)
Restricted Stock Award Agreement (Employees) Restricted Stock Award Agreement (Employees) (http://uk.practicallaw.com/topic0-510-7388)
Restricted Stock Award Agreement (Non-employee Directors) Restricted Stock Award Agreement (Non-employee Directors) (http://uk.practicallaw.com/topic0-525-6830)
Restricted Stock Unit Agreement (Cash-settled) (Employees) Restricted Stock Unit Agreement (Cash-settled) (Employees) (http://uk.practicallaw.com/topic9-520-6874)
Restricted Stock Unit Agreement (Cash-settled) (Non-employee Directors) Restricted Stock Unit Agreement (Cash-settled) (Non-employee Directors) (http://uk.practicallaw.com/topic5-528-5571)
Restricted Stock Unit Agreement (Stock-settled) (Employees) Restricted Stock Unit Agreement (Stock-settled) (Employees) (http://uk.practicallaw.com/topic9-512-6368)
Restricted Stock Unit Agreement (Stock-settled) (Non-employee Directors) Restricted Stock Unit Agreement (Stock-settled) (Non-employee Directors) (http://uk.practicallaw.com/topic1-527-6125)
Stock Appreciation Rights Agreement Stock Appreciation Rights Agreement (http://uk.practicallaw.com/topic3-517-0137)
Stock Option Exercise Agreement (Employees) Stock Option Exercise Agreement (Employees) (http://uk.practicallaw.com/topic0-518-0802)
Stock Option Exercise Agreement (Non-employee Directors) Stock Option Exercise Agreement (Non-employee Directors) (http://uk.practicallaw.com/topic6-525-5432)

Checklists

Equity Pitfalls under Section 409A Checklist Equity Pitfalls under Section 409A Checklist (http://uk.practicallaw.com/topic3-502-9252)
Requirements for Incentive Stock Options Checklist Requirements for Incentive Stock Options Checklist (http://uk.practicallaw.com/topic7-518-3717)
Section 162(m) Performance-based Compensation Exception Checklist Section 162(m) Performance-based Compensation Exception Checklist (http://uk.practicallaw.com/topic6-518-5217)
Taxation of Equity Compensation Awards Chart Taxation of Equity Compensation Awards Chart (http://uk.practicallaw.com/topic9-518-2627)

Legal update: archive

IRS Issues Proposed Regulations under Internal Revenue Code Section 83 IRS Issues Proposed Regulations under Internal Revenue Code Section 83 (http://uk.practicallaw.com/topic5-519-6909)

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