Taxes in Trump's/GOP America...

So, excess stock based compensation deductions occurs when a company has given stock options as compensation, the recipient exercises those options and the stock has appreciated in value.

If the company had simply paid the recipient more in dollars (rather than stock based compensation), the company could have expensed those dollars and therefore would have less taxable profit.

By issuing options, the company retains cash and incentives the employee (creates additional alignment.)

I assume the recipient (absent their own offsetting credits) ends up paying taxes on the gain upon triggering the options. So while the company does not pay those taxes, the individual does instead.

Is that correct? @juicystream

 

I'm an attorney who deals in the M&A space. You'll never convince me it's ok for Amazon to pay $0 in taxes to the federal govt in any given year. That's a problem.

 

This is beyond my expertise. I do recall there are multiple kinds of options and treated differently for tax purposes and GAAP purposes.

But yes, the employee ultimately ends up responsible for the taxes as compensation.

Personally I have articles like this because it insinuates magical tax breaks that are really loss carryovers and timing differences between tax treatment and GAAP treatment.

 

Appalling.

 

I get people's ire over this, but don't think it is so cut and dried. It depends on how the tax credits are constructed. *Assuming* they were well constructed, they are there for a reason, usually to create more jobs. People tend to have the tax credit discussion without considering what the purpose of the credits was.

This is easier to see in local tax credits, where locales provide large tax credits to lure business there...and hence get the corresponding jobs.

Now, one can certainly argue the effectiveness or desirability of such credits...but I think it grossly overstates the problem to have the discussion absent that side of it. That's like talking about car dealers taking tens of thousands of dollars from people...without mentioning that those people did get a car in the transaction.