Tax Implications of Stock-Based Compensation and Cost-Sharing Arrangements

The complexity in structuring stock-based compensation, intercompany recharge arrangements, and cost-sharing arrangements requires corporate taxpayers to adopt a tailored approach or accept substantial risk. To minimize adverse tax consequences, attorneys and advisers must recognize the tax implications, both for the parent company and subsidiary, when structuring and implementing stock-based compensation in intercompany recharge arrangements and cost-sharing arrangements.

Many multinational companies enter into intercompany recharge arrangements and cost-sharing agreements with their affiliates in low-tax jurisdictions. Within these arrangements, employees may be compensated with stock-based compensation, allowing the multinational company and subsidiary to take advantage of certain tax benefits. Now, these companies must reevaluate their tax positions and possibly restructure their cost-sharing arrangements since they may no longer be able to deduct the full cost of stock-based compensation.

In addition, the excise tax under Section 4501 applies to the repurchase of corporate stock. This excise tax applies directly to repurchasing corporations and significantly impacts stock-based compensation structures.

Listen as our panel discusses critical elements of Section 482 and applicable Treasury regulations, recent IRS enforcement actions, and transfer pricing challenges, as well as offers best practices in structuring stock-based compensation in intercompany recharge arrangements, cost-sharing arrangements and the potential application of Section 4501.

I. Section 482 and applicable regulations on stock-based compensation, intercompany recharge arrangements, and cost-sharing arrangements

II. Recent IRS enforcement initiatives

III. Key considerations in structuring stock-based compensation in intercompany recharge arrangements and cost-sharing arrangements

IV. Applicability of Section 4501 excise tax

V. Impact of OBBBA

VI. Best practices and pitfalls

The panel will review these and other crucial issues:

• What are the key tax considerations in structuring stock-based compensation and other arrangements?
• What issues arise from stock-based compensation in intercompany recharge arrangements and cost-sharing arrangements?
• Applicability of Section 4501 excise tax on stock-based compensation structures and pitfalls to avoid
• Impact of OBBBA
• What are the standards of review in the IRS examination of stock-based compensation and cost-sharing arrangements?

Learning Objectives

After completing this course, you will be able to:

• Identify key issues with the application of Section 482 to stock-based compensation cost-haring arrangements
• Recognize key tax issues in structuring stock-based compensation
• Understand the bases of IRS enforcement initiatives and review standards for stock-based compensation cost-sharing arrangements

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite:

  Three years+ business, legal or public firm experience at mid-level within the organization, providing tax planning and preparing complex tax forms and schedules for partnerships and LLCs; supervisory authority over other preparers/accountants. Knowledge and understanding of partnership and LLC structure, equity compensation in these entities; familiarity with equity compensation alternatives and equity interest for pass-through entity employees, members and partners.

Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.

IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).