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To: GVTucker who wrote (165358)	5/23/2002 5:00:23 PM
From: ptanner	Respond to of 186894

re: possible addition of FICA on options Yes, this would be an additional cost but relatively minor (7.6% for company and 7.6% for employee). But for well compensated individuals there would be only the Medicare portion due to the income limit on the remainder. This modification is reasonable to me (no options) as it is a form of compensation. This shouldn't be a real factor for companies, particularly those with top-heavy option awards. -PT

To: GVTucker who wrote (165358)	5/23/2002 5:21:56 PM
From: Windsock	Read Replies (1) \| Respond to of 186894

Another possibility is that the option "expense" would become income to the employee requiring the payment of tax. If the option "expense" is considered a labor expense it is hard to find that the option grant is not a payment to an employee. The next question is what happens if the option never vests or expires because it is under water. The almost certain result of expensing options is that employees will get screwed and executives will get covered.

To: GVTucker who wrote (165358)	5/24/2002 7:31:31 AM
From: Amy J	Respond to of 186894

Hi GV and PTanner, RE: "As has been noted to me by email...the government may request that a corporation fund FICA (on stock options)" AG already has requested this. That was the point of my post last week. I would reread Windsock's post. He hits the nail on the head. (My email was about how much easier it is for AG to achieve this, if his first proposal goes through.) So, AG is indeed pushing on both fronts: the reporting side and the tax side. Re: PTanner's "7.6% is small" It's not. It's huge. Payroll is usually a company's largest expense. 7.6% on options is a huge cost, say $2.5M for a $200M mkt cap. (Off the top of my head) that loosely translates to say one less headcount per 20 employees if costs are kept the same. Extrapolate this to a larger company (not sure of employee option pool size at large co's) but if a person wanted to keep costs fixed, it appears that could translate into a rather large headcount reduction. Or, instead of a headcount reduction, the alternative solution could be a reduction in options to employees, to keep costs the same. Take your pick, neither are good options for anyone. Investors could lose one of their best ways to motivate employees. Aside from the above, this would hurt employees (thus businesses) in several different ways: - Boards across Silicon Valley would grant less options to all employees (for two reasons: expensing & FICA costs) - from the employee's perspective, it would essentially turn ISOs (which are better for the employee since these are capital gains) into non-quals (which are income taxed). This isn't a huge issue for folks with a lot of stocks (because they get hit with AMT anyway), but it would impact the more entry level employee due to additional tax (income tax > capital tax). - separately, if the employee gets taxed at grant, well, that's a huge risk for the employee. (Windsock's post) Regards, Amy J