New Rules for ESPPs and Reporting ISO and ESPP Share Transactions

Late last year, the IRS issued final regulations affecting the form and operation of tax-qualified employee stock purchase plans (ESPPs), as well as final regulations affecting the tax reporting of transfers of shares acquired from ESPPs and exercises of incentive stock options (ISOs). These rules went into effect Jan. 1, 2010. The new ESPP rules include some important clarifications that may necessitate plan amendments or changes in administrative practices (see our previous newsletter on the 2008 proposed regulations). In addition, employees must receive information reports that meet updated requirements by Jan. 31, 2010, for ESPP and ISO share transactions that occurred in 2009.