I know that many of our readers, like me, are waiting with bated breath for the IRS and Treasury to release the final regs for filing Section 6039 returns with the IRS and for Section 423 plans. At last Thursday's Silicon Valley NASPP Chapter meeting, Ed Burmeister of Baker & McKenzie and Ellie Kehmeier of Deloitte Tax, gave an update on the status of these projects.
Final Regs Imminent (or Not So Imminent)
The final regs for both the Section 6039 returns and Section 423 have been drafted and sent to the IRS Chief Counsel for review and approval. Before the regs are finalized, they must be approved by the Chief Counsel and by Treasury. This could really go either way in terms of timing. If the Chief Counsel and Treasury are happy with the draft, they could be approved and issued very quickly. If further changes are required, the process could drag on for a while. As Ed pointed out, the final ISO regs weren't issued until twenty years after the first set of proposed regs.
Ed thinks that the regs that are most likely to be issued this year are those relating to 6039--primarily because there is a deadline associated with them. Under the Tax Relief and Health Care Act of 2006, companies should have been required to file these returns for transactions in 2007; we're now two years past that. The 423 regs, however, weren't initiated by an act of Congress (they were issued because of a general recognition that the industry needs clarification on the matters addressed in them), so there isn't as much pressure to publish them.
The TARP Wild Card
The wild card here is TARP and any other priorities the IRS and Treasury are currently dealing with. We all know that TARP has spawned numerous regulatory projects for both the IRS and Treasury, and given current public sentiment on the bail-out and executive compensation, as well as the fact that the Obama administration is probably far more worried about TARP companies than it is about Section 6039 returns, the TARP projects probably trump just about anything else the IRS and Treasury are working on in terms of priority. That most certainly explains why we haven't seen final regs yet and could mean an even longer delay.
A Reprieve on 6039 Returns
Based on conversations I've had with a treasury staffer, I think there's a good chance that the effective date for filing Section 6039 returns will be delayed (see my blog entry "Section 6039 and the Recession"). I don't know exactly what that means--will the requirement be suspended for transactions in 2009 or will companies just be given a little extra time to file the returns for these transactions. Nor do I know how long the delay will be.
I also don't know if the IRS will issue a notice definitively suspending the requirement to file returns for 2009 transactions if they don't issue final regulations by the end of this year. The proposed regs suspended the requirement to file the returns for 2008 transactions, but not for 2009. If we don't hear anything from the IRS, my understanding is that the requirement to file the returns can't go into effect until final regulations are issued. So no news means that you don't have to file the returns, at least until final regs are issued.
No Reprieve on Employee Information Statements
Note, however, that a delay in the effective date for filing the 6039 returns with the IRS in no way relieves companies of the obligation to distribute 6039 information statements to their employees. That requirement is currently in effect and will remain so under the final regs, so anticipate making sure those statements are distributed again this January.
Tune in Next Week
That's all I have space for today, but I'll have more information on what is expected in the final regs next week.
More Information
Previous blog entries:
- More on the Proposed ESPP Regs
- $25,000 Limit Under the Proposed ESPP Regs
- Correcting Mistakes Under the Proposed ESPP Regs
- Excluding Employees from a Section 423 ESPP
- General Instructions for Section 6039 Returns
- Electronic Filing of Section 6039 Returns
- Section 6039 and the Recession
NASPP Alerts:
- IRS Proposes New Regulations for Section 423 ESPPs
- IRS Proposes Regs for ISO and ESPP Information Returns
NASPP comment letters:
NASPP Conference Workshop of the Week
This week's workshop is 25 Ways to Improve Stock Plan Documents. Stock Plan documents are legally binding contracts that must comply with federal securities and tax laws, stock exchange rules, and accounting practices and should follow best practices in corporate governance and address institutional shareholder concerns. This presentation will list more than 25 separate plan design issues and include specific language for compliance with applicable law and best practices.
NASPP "To Do" List
We have so much going on here at the NASPP that it can be hard to keep track of it all, so I keep an ongoing "to do" list for you here in my blog.
- Register for the 17th Annual NASPP Conference.
- Make your hotel reservations for the NASPP Conference (don't delay--the hotel is already close to full on some nights).
- Renew your NASPP membership for 2009 (if you aren't an NASPP member, join today).
- Complete this month's Compliance-O-Meter quiz on Spreadsheet Usage.
- This is a big week for NASPP chapter meetings! The following chapters have meetings scheduled: Denver, Florida, Houston, Phoenix, Sacramento, and San Fernando Valley. If you are in one of these areas, don't miss this opportunity to network with your colleagues and learn something at the same time.
- Barbara