The
Internal Revenue Code for some time has required corporations to
provide written statements to employees regarding transfers of stock
pursuant to an exercised option or under an Employee Stock Purchase
Plan (ESPP). Effective for 2007, Congress amended the Code to require
the employer to also submit information returns to the IRS regarding
the transfers. However, because the IRS did not have regulations,
forms or processes in place to deal with the filings, in late 2007 the
IRS waived the requirement for the 2007 calendar year.
Last Thursday the IRS published Proposed Regulations
on the IRS filing process. The Proposed Regulations describe the
content and form used to satisfy the statutory filing requirement. New
IRS form 3921, Exercise of an Incentive Stock Option, and IRS form
3922, Transfer of Stock Acquired Through an ESPP, are used to provide
this information to employees and are filed with the IRS. They are not
yet available on the IRS web site. Although the Regulations are
effective as of January 1, 2007, they indicate that companies are not
required to comply with the return filing requirements for transfers
occurring during 2007 and 2008. So the first filing deadline under the
new process will be January 31, 2010, for transactions during 2009.
The Proposed Regulations allow companies to continue relying on the
current version of the regulations for transfers occurring through the
end of 2008, meaning the reports issued in January 2009 will be
unchanged.
While these are proposed regulations, we expect them to be finalized
later this year with little, if any, modification. Since transactions
occurring during 2009 will be subject to the new rules, companies must
ensure that they have data gathering processes or systems in place to
compile the required information in order to complete the IRS forms.