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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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Annual Notices for ISOs and ESPPs due February 2, 2015


Time to Read: 2 minutes Practices: Tax, Executive Compensation & Employee Benefits

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Companies that grant incentive stock options (ISOs) are required to provide notices to current and former employees who exercised ISOs during the preceding calendar year. Similar notices must be given to current and former employees to report the initial transfer of legal title to stock acquired at a discount pursuant to the exercise of an option under an employee stock purchase plan (ESPP) (e.g., transfer of such stock to a brokerage account). The notice deadline for these 2014 reportable events is February 2, 2015

The same information must be reported to the IRS on Form 3921 (for ISOs) or Form 3922 (for ESPPs) or acceptable substitute forms. The IRS filing deadline is March 2, 2015 for paper filers and March 31, 2015 for electronic filers. Electronic filing is done through Filing Information Returns Electronically (FIRE), the same system used to file Forms 1099 electronically. The IRS forms or acceptable substitutes may also be used to provide the required notices to employees. 

Notices are required to provide the items of information listed below.

Form 3921
For ISO exercises:

Form 3922
For ESPP stock transfers: 

  1. Name, address, and EIN of the corporation transferring stock.
  2. Name, address, and EIN of the corporation whose stock was transferred, if different.
  3. Name, address, and identifying number of the person to whom stock was transferred.
  4. Date the ISO was granted.
  5. Date the ISO was exercised.
  6. Exercise price per share.
  7. Fair market value per share on exercise date.
  8. Number of shares transferred.
  9. If the employee will receive multiple notices for the same type of transaction, each notice must include an “account number” that is unique to that transaction.
  1. Name, address, and EIN of the corporation whose stock was transferred.
  2. Name, address, and identifying number of the employee transferring stock.
  3. Date the ESPP option was granted.
  4. Date the ESPP option was exercised.
  5. Fair market value per share on grant date.
  6. Fair market value per share on exercise date.
  7. Exercise price paid per share.
  8. Number of shares transferred.
  9. Date legal title was transferred.
  10. Exercise price per share, determined as if the ESPP option was exercised on the grant date.
  11. If the employee will receive multiple notices for the same type of transaction, each notice must include an “account number” that is unique to that transaction.

 
A company that is unable to comply with the notice deadline may apply for an extension of up to 30 days by submitting to the IRS by February 2, 2015 a written request providing, among other information, the reason for the delay. An extension of the deadline for the related filings may be obtained by submitting a request on IRS Form 8809. Additional information about the notice and filing requirements as well as procedures for requesting extensions is available on the IRS website in both the General Instructions for Certain Information Returns and the specific Instructions for Forms 3921 and 3922.

For more information about these notice and filing requirements, please contact any member of Ropes & Gray’s tax or executive compensation and employee benefits practice groups.

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