The Internal Revenue Service issued Notice 2018-97 on December
7, providing initial guidance for the new Section 83(i) of the
Internal Revenue Code (Section 83(i)) enacted by the Tax Cuts and
Jobs Act. The notice principally addressed guidance on the 80
percent requirement under the act, a new mandatory withholding tax
mechanism and an opt-out opportunity for employers.
Background
Section 83(i) allows certain "qualified employees" of
"eligible corporations" an opportunity to elect to defer
federal income taxes from the exercise of stock options and/or
settlement of restricted stock units (RSUs) for up to five years.
By making a Section 83(i) election within 30 days of the exercise
of the option or the settlement of the RSU, employees defer federal
income taxes with respect to the stock received upon exercise or
settlement (deferral stock) until the earliest of the following
dates when:
