Section 83(i): Considerations And Pitfalls For Private Employers

Victoria Zerjav is a partner in Holland & Knight's New York office and Nicole Martini is an attorney in Holland & Knight's Philadelphia office

HIGHLIGHTS:

• Now that the IRS has issued additional guidance on the practical considerations of the election to defer compensation allowed by Section 83(i) of the Internal Revenue Code of 1986, as amended, it has become clearer that there are limited benefits to this election opportunity both for employees and employers. In addition, the burdens of Section 83(i) can be significant.
• Small employers should carefully consider the administrative burdens and potential benefits of offering a Section 83(i) election to its employees before implementing such an arrangement and consider taking action to affirmatively avoid the application, and obligations, of Section 83(i) by amending its equity plan.