Employee Stock Options: Tax Treatment and Tax Issues

[Excerpt] The practice of granting a company’s employees, officers, and directors options to purchase the company’s stock has become widespread among American businesses. According to Information Technology Associates, 15% to 20% of public companies offer stock options to employees as a part of their compensation package, and over 10 million employees receive them. During the technology company boom of the 1990s, they were especially important to start-up companies, allowing them to avoid paying large cash salaries to attract talent. Employee stock options have been extolled as innovative compensation plans benefitting companies, stockholders, and employees. They have been condemned as schemes to enrich insiders at the expense of ordinary stockholders and as tax avoidance devices. This report explains the tax treatment of various types of employee stock options recognized by the Internal Revenue Code, examines some of the issues that have arisen because of the real and perceived tax benefits accorded employee stock options, and describes key laws and regulations concerning stock options, and discusses the “book-tax” gap as it relates to stock options and S. 1375 (Ending Excessive Corporate Deductions for Stock Options Act)

Chrysler Corporation Loan Guarantee Acto of 1979: Background, Provisions, and Cost

[Excerpt] The American automobile industry has serious financial problems. Corporate executives from the Big Three (General Motors, Ford, and Chrysler) have testified before Congress about their need for federal credit (direct loans and guaranteed loans). This report examines the Chrysler loan guarantee program for possible insights that could assist Members of Congress in evaluating proposals to provide federal credit assistance. In 1979, Chrysler applied for federal loan guarantees. In 1979 and 1980, the economy was in recession and the price of oil had unexpectedly increased dramatically. However, at that time there was no financial liquidity crisis, as is the case today. Most of the arguments for and against the proposed Chrysler loan guarantee program are relevant to current proposals for credit assistance to the Big Three. For example, in the 1979 debate, proponents argued that the Chrysler loan guarantee would save many jobs. But opponents contended that the financial capital obtained for Chrysler by the proposed loan guarantee would have been used by other firms to expand their productive facilities, output, and employment. Thus, any Chrysler job losses could be offset by gains at other firms. Provisions in the Chrysler Loan Guarantee Act of 1979 included the establishment of a Chrysler Loan Guarantee Board, extensive federal oversight of Chrysler’s operations, detailed reporting requirements by Chrysler’s management, shared sacrifice of parties benefiting from the loan guarantee, and protection of the federal government’s interest. Chrysler used federal loan guarantees to borrow $1.2 billion of the$1.5 billion available and redeemed its guaranteed loans in 1982. Some critics argued that Chrysler was only able to return to profitability because of the imposition by the U.S. government of “voluntary” import quotas on Japanese vehicles. In 1980, the Chrysler loan guarantee was treated as a contingent liability with no initial cost at the time the guarantee was provided. Because Chrysler repaid all of its guaranteed loans, the U.S. government incurred no budgetary cost. Furthermore, the U.S. government received warrants to buy Chrysler stock, which it subsequently sold at auction to Chrysler for $311 million. Thus, it can be argued that the U.S. government made a profit from the loan guarantee program. Currently, the Federal Credit Reform Act requires that the reported budgetary cost of a credit program equal the estimated subsidy costs to the taxpayer at the time the credit is provided. For proposed legislation establishing a new credit program, the Congressional Budget Office is responsible for making the initial estimate of the subsidy cost. Once legislation has been enacted, the Office of Management and Budget estimates the subsidy cost on the credit program. An appropriation for the annual subsidy cost of each credit program is made into a budget account called a “credit program” account. Thus, under today’s budgetary rule, legislation providing direct loans or loan guarantees to assist the automobile industry would require the inclusion of the estimated subsidy cost, which would require an appropriation of budget authority. This report will be updated as issues develop and/or in the event of new legislation

Stock Options: The Backdating Issue

[Excerpt] Employee stock options are contracts giving employees the right to buy the company’s common stock at a specified exercise price, at a specified time or during a specified period, and after a specified vesting period. The value of the option when granted lies in the prospect that the market price of the company’s stock will increase by the time the option is exercised (used to purchase stock). At the grant date for the options, rather than selecting an exercise price based on the current market price for the stock, officials at some companies have selected a prior date with a lower market price; that is, they backdated stock options to an earlier grant date. If this backdating occurred without public disclosure, the recipient of the stock options received increased compensation in violation of Securities and Exchange Commission (SEC) regulations, generally accepted accounting rules, and tax laws. Some backdating is said to involve “sloppiness,” not fraud. The backdating of stock options has imposed costs on shareholders, employees, bondholders, and taxpayers. A corporate official who has profited from undisclosed backdating of stock options may not be responsible or even knowledgeable of the backdating. “Nonqualified” stock options, which have no special tax criteria to meet, are the focus of the backdating controversy primarily because they can be granted in unlimited amounts. The magnitude of stock option grants grew dramatically in the 1990s, subsequent to passage of the Omnibus Budget Reconciliation Act of 1993, a stock market boom, and revised accounting rules. Recent corporate disclosure changes have reduced the opportunities and rewards for backdating stock options. Empirical studies about backdating have been done by academics and investigative journalists. Four recent regulatory actions may have reduced the backdating of stock options, but problems persist. On December 16, 2004, the Financial Accounting Standards Board issued new rules requiring companies to subtract the expense of options from their earnings. After August 29, 2002, the Sarbanes-Oxley Act required that companies notify the SEC within two business days after granting stock options. In 2003, the SEC required increased disclosure of stock option plans. The SEC issued enhanced option grant disclosure rules effective December 15, 2006. Policy options to further reduce backdating and other timing manipulation include changes in SEC regulations and a change in the tax law. The SEC, various state prosecutorial, and Department of Justice (DOJ) probes into backdating abuses are ongoing. In addition, many firms have mounted their own internal probes into possible abuses. By November 2007, the SEC’s investigation caseload had fallen from a peak of 160 to about 80, and the SEC had brought civil enforcement actions against seven companies and 26 former executives associated with 15 firms. And according to reports from the DOJ, there were at least 10 criminal filings against defendants for backdating. As of January 2, 2008, the only CEO to be convicted of charges related to backdating was Greg Reyes, former Brocade CEO. This report will be updated as issues develop or new legislation is introduced

Feminist Collaboration in the Art Academy

Women\u27s activity in the visual arts both in and outside of the art institutions of Europe and the United States reveals a history of collaboration in artistic production and political activism This paper analyzes the effects of feminist collaboration upon the disciplines of art, the pedagogy of art, and the administration of art institutions. In Part I, the authors review the impact of feminist collaboration in art history, aesthetics, art criticism, and art production. Part II provides examples of collaborative experiences of women in higher education art institutions and in some art communities in the United States, Scandinavia, and Italy. Three conclusions emerged from the review: (a) Collaboration facilitated women\u27s entry into the visual arts; (b) collaborative dialogue has changed the academic structures of art criticism and art history, but collaboration has had a minimal effect in the areas of aesthetics and art production; and (c) collaboration has not resulted in a significant change in the administration or pedagogy of art institutions

Control System Design Philosophy for Effective Operations and Maintenance

A well-designed control system facilitates the functions of machine operation, maintenance and development. In addition, the overall effectiveness of the control system can be greatly enhanced by providing reliable mechanisms for coordination and communication, ensuring that these functions work in concert. For good operability, the information presented to operators should be consistent, easy to understand and customizable. A maintainable system is segmented appropriately, allowing a broken element to be quickly identified and repaired while leaving the balance of the system available. In a research and development environment, the control system must meet the frequently changing requirements of a variety of customers. This means the system must be flexible enough to allow for ongoing modifications with minimal disruptions to operations. Beyond the hardware and software elements of the control system, appropriate workflow processes must be in place to maximize system uptime and allow people to work efficiently. Processes that provide automatic electronic communication ensure that information is not lost and reaches its destination in a timely fashion. This paper discusses how these control system design and quality issues have been applied at the Thomas Jefferson National Accelerator Facility.Comment: ICALEPCS 200

Using A Nameserver to Enhance Control System Efficiency

The Thomas Jefferson National Accelerator Facility (Jefferson Lab) control system uses a nameserver to reduce system response time and to minimize the impact of client name resolution on front-end computers. The control system is based on the Experimental Physics and Industrial Control System (EPICS), which uses name-based broadcasts to initiate data communication. By default, when EPICS process variables (PV) are requested by client applications, all front-end computers receive the broadcasts and perform name resolution processing against local channel name lists. The nameserver is used to offload the name resolution task to a single node. This processing, formerly done on all front-end computers, is now done only by the nameserver. In a control system with heavily loaded front-end computers and high peak client connection loads, a significant performance improvement is seen. This paper describes the name server in more detail, and discusses the strengths and weaknesses of making name resolution a centralized service.Comment: ICALEPCS 200

Effects of Nitrogen Addition Timing and Herbivory on Plant Diversity

Different factors such as nutrient addition or herbivore loss are known to decrease plant species richness in tallgrass prairies. However, little is known about how variation in timing affects these factors. For example, an intense, brief addition of nitrogen (N) could have a greater effect on species richness versus persistent, low levels of N addition because of the community’s prolonged exposure to N. Furthermore, herbivore activity may reverse the effects of N temporal variation by balancing out the differences. The purpose of this project was to determine if adding a set amount of N to soil over different timeframes would change species richness with herbivory. To accomplish this, we added a constant amount of N to pots containing six tallgrass prairie plant species, in different temporal regimes. Half received all of the N pulse in the beginning of the experiment, while the other half received the same amount in weekly doses over four weeks. We measured percentage cover before and after simulated herbivory. Final biomass was also collected at the end of the experiment by cutting plants at the soil surface. We expect that the addition of N in the absence of herbivory will decrease plant species richness when compared to the N treatment with herbivory. We also expect that quick, intense levels of N will cause species richness to decline faster compared to smaller, persistent levels of N. This research addresses factors that possibly alter plant diversity in tallgrass prairie ecosystems

Oral History Interview: Ancella Bickley

This interview is one of series conducted concerning the Oral History of Appalachia. This interview was part of a project titled The Contributions of African-American Women in West Virginia. Dr. Bickley discusses: her personal history and childhood; her family (including how it conflicted with her professional life); her education (including an aunt who was a teacher, another teacher named Mrs. Mae D. Brown, and degrees from West Virginia State College and Marshall University); integration in education; her experiences as a student and as a professor; her employment history; church; projects she was involved in; her role in bringing the Carter G. Woodson statue to Huntington; plays & stories she was writing; people who served as role models to her; her experiences at Douglass High School; her involvement in history & oral history projects; discrimination she\u27 faced; the military (including missile defense systems); race relations in Germany and the United States; the Civil Rights Movement; her views on youth and problems of the time; and numerous other topics as well.https://mds.marshall.edu/oral_history/1537/thumbnail.jp