CEO stock options give companies tax windfall

[rdean]

Thanks to a quirk in tax law, companies can claim a tax deduction in future years that is much bigger than the value of the stock options when they were granted to executives. This tax break will deprive the federal government of tens of billions of dollars in revenue over the next decade. And it is one of the many obscure provisions buried in the tax code that together enable most American companies to pay far less than the top corporate tax rate of 35 percent — in some cases, virtually nothing even in very profitable years.

A stock option entitles its owner to buy a share of company stock at a set price over a specified period. The corporate tax savings stem from the fact that executives typically cash in stock options at a much higher price than the initial value that companies report to shareholders when they are granted.

But companies are then allowed a tax deduction for that higher price.

CEO stock options yield tax boon for firms - Business - US business

Wow, remember when you actually had to buy something to get a "tax break"?

The power of Republican congressmen, the best politicians money can buy.

And the base yells "Yea!" because they "earned" it.

 

[CrusaderFrank]

Wow, if only Democrats had any power in government...if only!

 

[Skull Pilot]

Thanks to a quirk in tax law, companies can claim a tax deduction in future years that is much bigger than the value of the stock options when they were granted to executives. This tax break will deprive the federal government of tens of billions of dollars in revenue over the next decade. And it is one of the many obscure provisions buried in the tax code that together enable most American companies to pay far less than the top corporate tax rate of 35 percent — in some cases, virtually nothing even in very profitable years.

A stock option entitles its owner to buy a share of company stock at a set price over a specified period. The corporate tax savings stem from the fact that executives typically cash in stock options at a much higher price than the initial value that companies report to shareholders when they are granted.

But companies are then allowed a tax deduction for that higher price.

CEO stock options yield tax boon for firms - Business - US business

Wow, remember when you actually had to buy something to get a "tax break"?

The power of Republican congressmen, the best politicians money can buy.

And the base yells "Yea!" because they "earned" it.

You do know that the people to whom stock options are given pay taxes on them don't you? http://www.smartmoney.com/personal-finance/taxes/employer-stock-option-tax-estimators-9303/

Do you want two bites of the apple?

 

[Full-Auto]

Thanks to a quirk in tax law, companies can claim a tax deduction in future years that is much bigger than the value of the stock options when they were granted to executives. This tax break will deprive the federal government of tens of billions of dollars in revenue over the next decade. And it is one of the many obscure provisions buried in the tax code that together enable most American companies to pay far less than the top corporate tax rate of 35 percent — in some cases, virtually nothing even in very profitable years.

A stock option entitles its owner to buy a share of company stock at a set price over a specified period. The corporate tax savings stem from the fact that executives typically cash in stock options at a much higher price than the initial value that companies report to shareholders when they are granted.

But companies are then allowed a tax deduction for that higher price.

CEO stock options yield tax boon for firms - Business - US business

Wow, remember when you actually had to buy something to get a "tax break"?

The power of Republican congressmen, the best politicians money can buy.

And the base yells "Yea!" because they "earned" it.

Repubs have controlled only two congresses in the past what? Hundred. Man up wussie.

 

[rdean]

Thanks to a quirk in tax law, companies can claim a tax deduction in future years that is much bigger than the value of the stock options when they were granted to executives. This tax break will deprive the federal government of tens of billions of dollars in revenue over the next decade. And it is one of the many obscure provisions buried in the tax code that together enable most American companies to pay far less than the top corporate tax rate of 35 percent — in some cases, virtually nothing even in very profitable years.

A stock option entitles its owner to buy a share of company stock at a set price over a specified period. The corporate tax savings stem from the fact that executives typically cash in stock options at a much higher price than the initial value that companies report to shareholders when they are granted.

But companies are then allowed a tax deduction for that higher price.

CEO stock options yield tax boon for firms - Business - US business

Wow, remember when you actually had to buy something to get a "tax break"?

The power of Republican congressmen, the best politicians money can buy.

And the base yells "Yea!" because they "earned" it.

Repubs have controlled only two congresses in the past what? Hundred. Man up wussie.

For most of Clinton's term and for six straight years under Bush. Unfortunately, that's when the foundation was laid for all the damage we see today. It's not something you can really deny. "Reconciliation" anyone?

 

[eflatminor]

Republican congressmen, the best politicians money can buy.

I'm sorry, are you suggesting that federal tax code which allowed this "quirk in tax law" was passed by Republican Congressmen and not Democrat Congressmen?

I'm pretty sure any changes to the tax code requires passage by the Congress, not just the Republicans in Congress. Last time I checked, there have been both Dems and Repubs in power for some time.

It would seem, once again, that you are full of shit.

 

[paulitician]

Wow, if only Democrats had any power in government...if only!

ZING BOING!!

 

[paulitician]

I'm sure Obama's "Jobs Czar" GE CEO Jeffrey Immelt is very glad to hear this.

 

[eflatminor]

For most of Clinton's term and for six straight years under Bush. Unfortunately, that's when the foundation was laid for all the damage we see today. It's not something you can really deny. "Reconciliation" anyone?

Of course, the tax code was last overhauled in 1986, when Democrats had control of Congress. My goodness your bullshit meter is off the charts today.

 

[bripat9643]

Thanks to a quirk in tax law, companies can claim a tax deduction in future years that is much bigger than the value of the stock options when they were granted to executives. This tax break will deprive the federal government of tens of billions of dollars in revenue over the next decade. And it is one of the many obscure provisions buried in the tax code that together enable most American companies to pay far less than the top corporate tax rate of 35 percent — in some cases, virtually nothing even in very profitable years.

A stock option entitles its owner to buy a share of company stock at a set price over a specified period. The corporate tax savings stem from the fact that executives typically cash in stock options at a much higher price than the initial value that companies report to shareholders when they are granted.

But companies are then allowed a tax deduction for that higher price.

CEO stock options yield tax boon for firms - Business - US business

Wow, remember when you actually had to buy something to get a "tax break"?

The power of Republican congressmen, the best politicians money can buy.

And the base yells "Yea!" because they "earned" it.

Sarbanes-Oxley requires corporations to list the cash-out value of stock options as a liability on their balance sheets. If that's the case, then they should also be allowed to list them as an expense on their income taxes.

Liberal turds like you always want to have everything both ways.

 

[Baruch Menachem]

I think the Deanster's issue is the fact that the fat cat pays 15% on the cashed out value of the option as it is listed as a capital gain rather than the 35% that would be paid as if it were taxed at the corporate level or as ordinary income to the fat cat.

I think he errs in assuming that Republicans are responsible for this particular stupidity. I would be very annoyed if he were right. This strikes me as the kind of inside out concentrated goofiness you get with a Democratic tax code that is so convoluted and obscure that only those who have legions of tax lawyers on their payroll can benefit from it. A tax system that was more forthright, had lower more honest rates and didn't have punitive rates for show and cute deals like this for friends of congressmen behind the door would be far better. But since hatred drives the tax code rather than good sense, this is the kind of stupid that you get.

 

[Toro]

Thanks to a quirk in tax law, companies can claim a tax deduction in future years that is much bigger than the value of the stock options when they were granted to executives. This tax break will deprive the federal government of tens of billions of dollars in revenue over the next decade. And it is one of the many obscure provisions buried in the tax code that together enable most American companies to pay far less than the top corporate tax rate of 35 percent — in some cases, virtually nothing even in very profitable years.

A stock option entitles its owner to buy a share of company stock at a set price over a specified period. The corporate tax savings stem from the fact that executives typically cash in stock options at a much higher price than the initial value that companies report to shareholders when they are granted.

But companies are then allowed a tax deduction for that higher price.

CEO stock options yield tax boon for firms - Business - US business

Wow, remember when you actually had to buy something to get a "tax break"?

The power of Republican congressmen, the best politicians money can buy.

And the base yells "Yea!" because they "earned" it.

So what?

In GAAP accounting, losses are taken on the change in value (if they appreciate) after the stock options have been granted. If we wanted to be consistent with GAAP, then we should increase (or decrease) the value of the stock option each and every year, and pay the tax accordingly. But since we don't, and since the tax code does not recognize the changes in market value of any asset with taxes paid only when the asset is sold, the right and proper way to account for the stock option is when they are exercised, not when they are granted.

 

[paulitician]

Barack Obama will run the most expensive Presidential Campaign in History. And it will be mostly funded by large Corporations. Especially by big Corporate Banks. He has already received more cash from Big Banks than any other Politician in the last 20yrs. His followers don't know that though. And i'm pretty sure that's because they don't want to know.

 

[rdean]

For most of Clinton's term and for six straight years under Bush. Unfortunately, that's when the foundation was laid for all the damage we see today. It's not something you can really deny. "Reconciliation" anyone?

Of course, the tax code was last overhauled in 1986, when Democrats had control of Congress. My goodness your bullshit meter is off the charts today.

Yea, because it was the tax code from 1986 that moved millions of jobs to China. That created trillions in tax cuts that benefited mostly the wealthy. The passed a "drugs for votes" bill.

It's a pretty lame attempt at rewriting history. If you are going to try, go all out. Like they did at the Reagan Legacy Project. They just made up someone completely different.

 

[rdean]

Barack Obama will run the most expensive Presidential Campaign in History. And it will be mostly funded by large Corporations. Especially by big Corporate Banks. He has already received more cash from Big Banks than any other Politician in the last 20yrs. His followers don't know that though. And i'm pretty sure that's because they don't want to know.

prove it. and make sure you have your facts right. the employees giving obama money is not the same as the money coming from the board of directors.

 

[eflatminor]

For most of Clinton's term and for six straight years under Bush. Unfortunately, that's when the foundation was laid for all the damage we see today. It's not something you can really deny. "Reconciliation" anyone?

Of course, the tax code was last overhauled in 1986, when Democrats had control of Congress. My goodness your bullshit meter is off the charts today.

Yea, because it was the tax code from 1986 that moved millions of jobs to China. That created trillions in tax cuts that benefited mostly the wealthy. The passed a "drugs for votes" bill.

It's a pretty lame attempt at rewriting history. If you are going to try, go all out. Like they did at the Reagan Legacy Project. They just made up someone completely different.

My advice, set the bottle down and take three steps back.

Seriously, what in the fuck are you talking about? Your OP was about tax code that you disagreed with. Fine. However, you blamed Republicans for that code when it was written when Democrats were in control of Congress. When you get called out on that, you bring up jobs moving to China? What in the fuck does that have to do with CEO stock options, the point of YOUR original post?

My goodness you're a confused little puppy.

 

[Avatar4321]

stop trying to take other peoples money and get a job you lazy bum.

 

[eflatminor]

...the employees giving obama money is not the same as the money coming from the board of directors.

Actually it is. Any money received from an organization's PAC comes from that organization's employees or owners and their immediate family members. No distinction is made between donations from a worker paid by the hour or a salaried employee who may sit on the company's board.

Further, while we don't yet know which company PACs will be Obama's largest supporters, we do know who supported him in 2008...a hell of a lot of banks and other 'evil' companies it turns out:

University of California $1,648,685
Goldman Sachs $1,013,091
Harvard University $878,164
Microsoft Corp $852,167
Google Inc $814,540
JPMorgan Chase & Co $808,799
Citigroup Inc $736,771
Time Warner $624,618
Sidley Austin LLP $600,298
Stanford University $595,716
National Amusements Inc $563,798
WilmerHale LLP $550,668
Columbia University $547,852
Skadden, Arps et al $543,539
UBS AG $532,674
IBM Corp $532,372
General Electric $529,855
US Government $513,308
Morgan Stanley $512,232
Latham & Watkins $503,295

 

[BillyV]

Thanks to a quirk in tax law, companies can claim a tax deduction in future years that is much bigger than the value of the stock options when they were granted to executives. This tax break will deprive the federal government of tens of billions of dollars in revenue over the next decade. And it is one of the many obscure provisions buried in the tax code that together enable most American companies to pay far less than the top corporate tax rate of 35 percent — in some cases, virtually nothing even in very profitable years.

A stock option entitles its owner to buy a share of company stock at a set price over a specified period. The corporate tax savings stem from the fact that executives typically cash in stock options at a much higher price than the initial value that companies report to shareholders when they are granted.

But companies are then allowed a tax deduction for that higher price.

CEO stock options yield tax boon for firms - Business - US business

Wow, remember when you actually had to buy something to get a "tax break"?

The power of Republican congressmen, the best politicians money can buy.

And the base yells "Yea!" because they "earned" it.

You do know that the people to whom stock options are given pay taxes on them don't you? Employer Stock-Option Tax Estimators - SmartMoney.com

Do you want two bites of the apple?

Stock option treatment is a very complex area of tax law. However, as stated in the article, usually this is compensation (ordinary) income to the employee/CEO, and is taxed at ordinary rates. The company gets a deduction because it is a real cost. Look at it another way; Company wants to pay a bonus to CEO; Company goes to the capital markets to sell stock to pay for bonus; Stock price reflects diluted share price from sale of additional shares (probably not noticeable in a large company); Company pays CEO in cash, and records tax expense for compensation. What's different? So the company in fact gives up cash it could have received in the market the day the CEO exercised the option, and gets a deduction that will provide it (perhaps) 35% of the amount it could have had. This is a quirk?