Collapse to view only § 4985. Stock compensation of insiders in expatriated corporations
§ 4985. Stock compensation of insiders in expatriated corporations
(a) Imposition of tax
In the case of an individual who is a disqualified individual with respect to any expatriated corporation, there is hereby imposed on such person a tax equal to—
(1) the rate of tax specified in section 1(h)(1)(D), multiplied by
(2) the value (determined under subsection (b)) of the specified stock compensation held (directly or indirectly) by or for the benefit of such individual or a member of such individual’s family (as defined in section 267) at any time during the 12-month period beginning on the date which is 6 months before the expatriation date.
(b) Value
For purposes of subsection (a)—
(1) In general
The value of specified stock compensation shall be—
(A) in the case of a stock option (or other similar right) or a stock appreciation right, the fair value of such option or right, and
(B) in any other case, the fair market value of such compensation.
(2) Date for determining value
The determination of value shall be made—
(A) in the case of specified stock compensation held on the expatriation date, on such date,
(B) in the case of such compensation which is canceled during the 6 months before the expatriation date, on the day before such cancellation, and
(C) in the case of such compensation which is granted after the expatriation date, on the date such compensation is granted.
(c) Tax to apply only if shareholder gain recognized
(d) Exception where gain recognized on compensation
Subsection (a) shall not apply to—
(1) any stock option which is exercised on the expatriation date or during the 6-month period before such date and to the stock acquired in such exercise, if income is recognized under section 83 on or before the expatriation date with respect to the stock acquired pursuant to such exercise, and
(2) any other specified stock compensation which is exercised, sold, exchanged, distributed, cashed-out, or otherwise paid during such period in a transaction in which income, gain, or loss is recognized in full.
(e) Definitions
For purposes of this section—
(1) Disqualified individual
The term “disqualified individual” means, with respect to a corporation, any individual who, at any time during the 12-month period beginning on the date which is 6 months before the expatriation date—
(A) is subject to the requirements of section 16(a) of the Securities Exchange Act of 1934 with respect to such corporation or any member of the expanded affiliated group which includes such corporation, or
(B) would be subject to such requirements if such corporation or member were an issuer of equity securities referred to in such section.
(2) Expatriated corporation; expatriation date
(A) Expatriated corporation
(B) Expatriation date
(3) Specified stock compensation
(A) In general
(B) Exceptions
Such term shall not include—
(i) any option to which part II of subchapter D of chapter 1 applies, or
(ii) any payment or right to payment from a plan referred to in section 280G(b)(6).
(4) Expanded affiliated group
(f) Special rules
For purposes of this section—
(1) Cancellation of restriction
(2) Payment or reimbursement of tax by corporation treated as specified stock compensation
Any payment of the tax imposed by this section directly or indirectly by the expatriated corporation or by any member of the expanded affiliated group which includes such corporation—
(A) shall be treated as specified stock compensation, and
(B) shall not be allowed as a deduction under any provision of chapter 1.
(3) Certain restrictions ignored
(4) Property transfers
(5) Other administrative provisions
(g) Regulations
(Added Pub. L. 108–357, title VIII, § 802(a), Oct. 22, 2004, 118 Stat. 1566; amended Pub. L. 115–97, title I, § 13604(a), Dec. 22, 2017, 131 Stat. 2165.)