11/29/00
Philadelphia Amends Wage Tax Laws Relating to Stock Options

The City of Philadelphia is no longer subjecting the spread at exercise on stock options to city wage tax. Under the new law, stock options that have a "readily ascertainable market value" (as defined in IRC Section 83 -- most stock option grants do not) on the date of grant are subject to wage tax at their fair market value.  At the time of exercise, any income received is exempt from city wage tax. Options having no readily ascertainable value on the date of grant (i.e., most company-granted stock options) will not result in taxable income at the time of grant nor will income from the exercise of the stock option be taxable. Where an option is granted in lieu of cash compensation, however, the options are subject to Philadelphia's tax, based on the amount of cash offered.