Legal Alerts

New End of the Year ISO and ESPP Reporting Requirements

12.01.10

New end of the year reporting requirements for incentive stock options (“ISO”) and employee stock purchase plans (“ESPP”) require employer action by early 2011.

Section 6039 of the Internal Revenue Code requires that public and private corporations meet certain reporting requirements when the corporation (i) transfers a share of stock pursuant to a participant’s exercise of an ISO; or (ii) initially transfers the legal title of shares of stock acquired by a participant under an ESPP where the purchase price was discounted or was not fixed or determinable at the date of grant.    

For these ISO and ESPP transactions that occurred prior to 2010, the only reporting requirement for corporations was to provide information statements about the transaction to participants on or before January 31 of the year following the year in which the transaction occurred.

Beginning for ISO and ESPP transactions that occur during 2010, the corporation is now required to provide the information statements to participants on or before January 31 of the year following the year in which the transaction occurred and file an information return with the IRS no later than February 28, if filing on paper, or March 31, if filing electronically, of the year following  the year in which the transaction occurred.  Both the information statement to participants and IRS information return are required to be provided by using the newly issued IRS Form 3921 for ISOs and IRS Form 3922 for ESPPs.  Below is a summary of these reporting requirements for ISO and ESPP transactions that occur in 2010.

When is a reporting necessary?

What IRS Form to send?

Who to send it to?

When is the IRS Form due?

For each transfer of stock  from a participant’s exercise of an ISO in 2010.

IRS Form 3921 Copy B

IRS Form 3921 Copy A

Participant

IRS

January 31, 2011

February 28, 2011 if filing on paper, or
March 31, 2011 if filing electronically

For the initial transfer of stock acquired under an ESPP in 2010 where the price was discounted or not fixed or determinable at date of grant.

IRS Form 3921 Copy B

IRS Form 3921 Copy A

Participant

IRS

January 31, 2011

February 28, 2011 if filing on paper, or
March 31, 2011 if filing electronically

If you have questions or need additional information about these or other employee benefit matters, contact one of our attorneys or visit our Employment Law Resource Center. 

This Legal Alert is a periodic publication of Lindquist & Vennum P.L.L.P. and is intended to provide basic information about new developments in the law. It should not be construed as legal advice or legal opinion on any specific facts or circumstances. The contents are intended for general informational purposes only, and you are urged to consult your own attorney concerning your situation and specific legal questions you have.  

Contact
LaFromboise, Antoine J.
Communications and Brand Manager
T 612.371.3269

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