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American Family Plan—Summary of Certain Key Tax Components

On Wednesday April 28, 2021, President Joseph R. Biden announced the American Families Plan, designed to expand access to education, child care, and health care, among other initiatives. The White House released a fact sheet outlining the plan, and Biden detailed the plan in an address to Congress. The American Families Plan would be funded by increasing tax enforcement on corporations and high-income taxpayers, enforcement of which would be supported by newly enhanced information reporting from financial institutions. The initiatives would also be funded by raising taxes on high-income taxpayers, including (i) increasing the top income tax rate to 39.6% from 37%, (ii) increasing the capital gains rate to 39.6% from 20% for those earning $1 million or more, (iii) eliminating a step-up in basis for gains in excess of $1 million, (iv) eliminating the carried interest loophole, (v) eliminating the special real estate tax break on gains greater than $500,000, (vi) extending the limitation that restricts excess business losses, (vii) and ensuring those making over $400,000 pay the same consistent 3.8% Medicare tax. These proposals are summarized in this Alert.

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Important Changes to California Rules on the Granting of Stock Options


Time to Read: 1 minutes Practices: Tax

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The California Corporations Commissioner has repealed significant regulatory restrictions on employee options and other equity grants effective July 9, 2007. The new regulations make several changes to the rules for options and compensatory grants of securities other than options, including to:

  • Repeal the prohibition on performance-based vesting or time-based vesting that is not as rapid as 20 percent per year for five years for employees other than managers or officers.
  • Repeal the requirement that the exercise price or purchase price not be less than 85 percent of fair value (or 100 percent for a more-than 10 percent owner).
  • Facilitate the extension of plans adopted earlier and then extended to California residents by allowing shareholder approval to occur within 12 months of the issuance of options to California residents. In addition, foreign private issuers may make grants to up to 35 persons without obtaining shareholder approval.
  • For plans subject to Rule 701, adopt the federal rules on financial disclosure.

For additional information, please call a member of our Tax & Benefits Department.

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