Td_9470

jlentini on DSKJ8SOYB1PROD with RULES

Federal Register / Vol. 74, No. 220 / Tuesday, November 17, 2009 / Rules and Regulations
the donee’s basis, as of the time of the gift,
for determining gain or loss.
Example 6. Assume the same facts as in
Example 2, except that instead of selling the
share on January 1, 2014, P makes a gift of
the share on that date. Because the fair
market value of the share on that day ($75)
is less than the option price ($85), no amount
in respect of the disposition by way of gift
is includible as compensation in P’s gross
income for 2014. P’s basis for the share is
$85, which becomes the donee’s basis, as of
the time of the gift, for the purpose of
determining gain. The donee’s basis for the
purpose of determining loss, determined
under section 1015(a), is $75 (fair market
value of the share at the date of gift).
Example 7. Assume the same facts as in
Example 1, except that after acquiring the
share of stock on June 1, 2011, P dies on
August 1, 2012, at which time the share has
a fair market value of $150. Compensation in
the amount of $15 is includible in P’s gross
income for the taxable year closing with P’s
death, $15 being the difference between the
option price ($85) and the fair market value
of the share when the option was granted
($100), because such value is less than the
fair market value at date of death ($150). The
basis of the share in the hands of P’s estate
is determined under section 1014 without
regard to the $15 includible in the decedent’s
gross income.
Example 8. Assume the same facts as in
Example 7, except that P dies on August 1,
2011, at which time the share has a fair
market value of $150. Although P’s death
occurred within one year after the transfer of
the share to P, the income tax consequences
are the same as in Example 7.
Example 9. Assume the same facts as in
Example 1, except that the share of stock was
issued in the names of P and P’s spouse
jointly with right of survivorship, and that P
and P’s spouse sold the share on June 15,
2012, for $150, its fair market value on that
date. Compensation in the amount of $15 is
includible in P’s gross income for the year
2012, the year of the disposition of the share.
The basis of the share in the hands of P and
P’s spouse for the purpose of determining
gain or loss on the sale is $100, that is, the
cost of $85 increased by the amount of $15
includible as compensation in P’s gross
income. The gain of $50 on the sale is treated
as long-term capital gain, and is divided
equally between P and P’s spouse.
Example 10. Assume the same facts as in
Example 1, except that the share of stock was
issued in the names of P and P’s spouse
jointly with right of survivorship, and that P
predeceased P’s spouse on August 1, 2012, at
which time the share had a fair market value
of $150. Compensation in the amount of $15
is includible in P’s gross income for the
taxable year closing with his death. See
Example 7. The basis of the share in the
hands of P’s spouse as survivor is determined
under section 1014 without regard to the $15
includible in the decedent’s gross income.
Example 11. Assume the same facts as in
Example 10, except that P’s spouse
predeceased P on July 1, 2012. Section 423(c)
does not apply in respect of the death of P’s
spouse. Upon the subsequent death of P on
August 1, 2012, the income tax consequences

VerDate Nov<24>2008

15:56 Nov 16, 2009

Jkt 220001

59087

in respect of P’s taxable year closing with the
date of P’s death, and in respect of the basis
of the share in the hands of P’s estate, are the
same as in Example 7. If P had sold the share
on July 15, 2012 (after the death of P’s
spouse), for $150, its fair market value at that
time, the income tax consequences would be
the same as in Example 1.

DEPARTMENT OF THE TREASURY

(l) Effective/applicability date. The
regulations under this section are
effective on November 17, 2009. The
regulations under this section apply to
options granted under an employee
stock purchase plan on or after January
1, 2010.

Information Reporting Requirements
Under Internal Revenue Code Section
6039

Par. 6. Section 1.424–1, paragraphs
(a)(10) Example 9 (iii) and (g)(1) are
revised to read as follows:

■

§ 1.424–1 Definition and special rules
applicable to statutory options.

(a) * * *
(10) * * *
Example 9. * * * (iii) Assume the same
facts as in paragraphs (i) and (ii) of this
Example 9. Assume further that as part of the
acquisition, X amends its plan to allow future
grants under the plan to be grants to acquire
Y stock. Because the amendment of the plan
to allow options on a different stock is
considered the adoption of a new plan under
§ 1.422–2(b)(2)(iii), the stockholders of X (in
this case, Y) must approve the plan within
12 months before or after the date of the
amendment of the plan. If the stockholders
of X (in this case, Y) timely approve the plan,
the future grants to acquire Y stock will be
incentive stock options (assuming the other
requirements of § 1.422–2 have been met).

*

*
*
*
*
(g) Effective/applicability date—(1) In
general. Except for § 1.424–1(a)(10)
Example 9 (iii), the regulations under
this section are effective on August 3,
2004. Section 1.424–1(a)(10) Example 9
(iii) is effective on November 17, 2009.
Section 1.424–1(a)(10) Example 9 (iii)
applies to statutory options granted on
or after January 1, 2010.
*
*
*
*
*

Linda E. Stiff,
Deputy Commissioner for Services and
Enforcement.
Approved: November 9, 2009.
Michael F. Mundaca,
Acting Assistant Secretary of the Treasury
(Tax Policy).
[FR Doc. E9–27452 Filed 11–16–09; 8:45 am]
BILLING CODE 4830–01–P

PO 00000

Frm 00055

Fmt 4700

Sfmt 4700

Internal Revenue Service
26 CFR Part 1
[TD 9470]
RIN 1545–BH69

AGENCY: Internal Revenue Service (IRS),
Treasury.
ACTION: Final regulations.
SUMMARY: This document contains the
final regulations relating to the return
and information statement requirements
under section 6039 of the Internal
Revenue Code (Code). These regulations
reflect changes to section 6039 made by
section 403 of the Tax Relief and Health
Care Act of 2006. These regulations
affect corporations that issue statutory
stock options and provide guidance to
assist corporations in complying with
the return and information statement
requirements under section 6039.
DATES: Effective Date: These regulations
are effective on November 17, 2009.
Applicability Date: For dates of
applicability, see §§ 1.6039–1(g) and
1.6039–2(e).
FOR FURTHER INFORMATION CONTACT:
Thomas Scholz or Ilya Enkishev at (202)
622–6030 (not a toll-free number).
SUPPLEMENTARY INFORMATION:

Paperwork Reduction Act
The collection of information
contained in these regulations has been
reviewed and approved by the Office of
Management and Budget in accordance
with the Paperwork Reduction Act of
1995 (44 U.S.C. 3507(d)) under control
number 1545–2129. Responses to this
collection of information are required to
assist taxpayers with the completion of
their income tax returns for the taxable
year in which a disposition of stock
acquired under a statutory option
occurs.
An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
unless the collection of information
displays a valid control number
assigned by the Office of Management
and Budget.
Books or records relating to a
collection of information must be
retained as long as their contents may
become material in the administration
of any internal revenue law. Generally,
tax returns and tax return information
are confidential, as required by 26
U.S.C. 6103.

E:\FR\FM\17NOR1.SGM

17NOR1

jlentini on DSKJ8SOYB1PROD with RULES

59088

Federal Register / Vol. 74, No. 220 / Tuesday, November 17, 2009 / Rules and Regulations

Background
Section 403 of the Tax Relief and
Health Care Act of 2006 (Act) amended
the information reporting requirements
of section 6039. Prior to its amendment,
section 6039 required corporations to
furnish a written statement to each
employee, in a manner prescribed by
the Secretary in the regulations,
regarding: (i) The corporation’s transfer
of stock pursuant to the employee’s
exercise of an incentive stock option
described in section 422(b); and (ii) the
transfer of stock by the employee where
the stock was acquired pursuant to the
exercise of an option described in
section 423(c). Corporations must
furnish employees with the information
statements required by section 6039 on
or before January 31 of the year
following the year for which the
statement is required. Prior to the
amendment of section 6039 made by the
Act, the regulations under section 6039
were last updated in 2004. See TD 9144
(69 FR 46401).
As amended by the Act, section 6039
requires corporations to file an
information return with the IRS, in
addition to providing employees with
an information statement, following a
stock transfer. Section 6039, as amended
by the Act, applies to stock transfers
occurring on or after January 1, 2007.
However, in Notice 2008–8, 2008–3 IRB
276 (December 19, 2007) (see
§ 601.601(d)(2)(ii)(b)), the IRS waived
the obligation to file an information
return for 2007 stock transfers governed
by section 6039.
On July 17, 2008, the Department of
Treasury published a notice of proposed
rulemaking (REG–103146–08) in the
Federal Register (73 FR 40999) under
section 6039. In addition to describing
the return and information reporting
requirements pursuant to section 6039,
the notice of proposed rulemaking
waived the obligation to file an
information return for 2008 stock
transfers governed by section 6039. A
public hearing on the proposed
regulations was held on October 30,
2008. Written and electronic comments
responding to the notice of proposed
rulemaking were received. After
consideration of these comments, the
Department of Treasury adopts the
proposed regulations as final
regulations, with the modifications set
forth in this Treasury decision. The
significant revisions are discussed in
this preamble.
Explanation of Provisions
1. Overview
These final regulations describe the
information that is required in the

VerDate Nov<24>2008

15:56 Nov 16, 2009

Jkt 220001

return filed with the IRS and the
information statement furnished to
employees pursuant to section 6039.
There are two sections under these final
regulations: § 1.6039–1, Returns
required in connection with certain
options; and § 1.6039–2, Statements to
persons with respect to whom
information is reported. A principal
objective of these final regulations is to
require corporations to furnish
employees with sufficient information
to enable them to calculate their tax
obligations upon disposition of the
shares acquired by the exercise of a
statutory option. As discussed further in
this preamble, the IRS will issue two
forms (with accompanying instructions)
that corporations must use to satisfy the
return and information statement
requirements under section 6039.
Comments received in response to the
proposed regulations were generally
favorable. Commenters observed that
the proposed regulations improved the
existing regulations by requiring
corporations to provide additional
information useful to employees for
purposes of computing tax liability with
respect to the disposition of shares
acquired pursuant to the exercise of a
statutory option. These final regulations
are generally similar to the proposed
regulations with the modifications
described below in response to the
comments submitted by taxpayers.
2. Return and Information Statement
Requirements for Stock Acquired
Pursuant to Incentive Stock Options
With respect to the transfer of stock
pursuant to the exercise of an incentive
stock option, the information required
in the return and the information
statement pursuant to § 1.6039–1(a) and
§ 1.6039–2(a) of these final regulations
is the same information that is required
pursuant to the proposed regulations.
3. Return and Information Statement
Requirements for Stock Acquired Under
Employee Stock Purchase Plans
a. Transfers of Legal Title for Stock
Acquired Under an Employee Stock
Purchase Plan
Section 6039(a)(2) requires every
corporation which records (or has by its
agent recorded) a transfer of the legal
title of a share of stock acquired by the
employee where the stock was acquired
pursuant to the exercise of an option
described in section 423(c) to file a
return with respect to each transfer
made during a particular year. Section
6039(c)(2) provides that the return
under section 6039(a)(2) is required
only with respect to the first transfer of
such stock by the person who exercised

PO 00000

Frm 00056

Fmt 4700

Sfmt 4700

the option. Section 6039(b) requires
every corporation filing a return under
section 6039(a)(2) to furnish to each
employee named in such return a
written statement with respect to the
transfer or transfers made by the
employee during a particular year.
Several commenters noted that it has
become common practice for employers
to maintain a system in which shares
acquired by employees under an
employee stock purchase plan are
deposited directly into a brokerage
account established on behalf of the
employee. In the typical arrangement, a
contractual agreement exists with a
recognized broker or financial
institution, and employees who elect to
participate in the employee stock
purchase plan direct that all shares
acquired upon the exercise of the option
be immediately deposited into a
brokerage account established on behalf
of the employee. The legal title of the
shares deposited into the brokerage
account is typically held by another
entity acting as a securities depository,
which holds the shares in the street
name of the broker. The employee has
a beneficial interest in the shares, but
the securities depository holds legal title
of the shares.
The final regulations modify
§ 1.6039–1(b)(3) of the proposed
regulations to provide that a transfer of
legal title to a recognized broker or
financial institution immediately
following the exercise of an option is
treated as the first transfer of legal title
for purposes of the section 6039(a)(2)
filing requirement. Accordingly, if an
employer operates an employee stock
purchase plan pursuant to which shares
acquired upon exercise of the option
will be immediately deposited into a
brokerage account established on behalf
of the employee, then the deposit of
shares by the employee into the
brokerage account following the
exercise of the option is the first transfer
of legal title of the shares acquired by
the employee and the corporation is
only required to file a return relating to
such transfer of legal title.
For employees whose shares are
immediately deposited into a brokerage
account following the exercise of an
option, the exercise of the option and
the first transfer of legal title occur on
the same date. In such a case, the dates
to be provided under §§ 1.6039–
1(b)(1)(vii) (the date the option was
exercised) and (ix) (the date legal title
was first transferred) will be the same.
If, instead of establishing a brokerage
arrangement, an employer either issues
a stock certificate directly to an
employee who purchases stock pursuant
to an employee stock purchase plan, or

E:\FR\FM\17NOR1.SGM

17NOR1

Federal Register / Vol. 74, No. 220 / Tuesday, November 17, 2009 / Rules and Regulations

jlentini on DSKJ8SOYB1PROD with RULES

registers the shares in the employee’s
name on the employer’s record books
and the employer or its transfer agent
holds the shares for the employee in
book-entry form, then, for purposes of
section 6039(a)(2) and (c)(2), the
issuance of the stock certificate or the
registration of the stock ownership on
the record books is not considered the
first transfer of legal title of the stock
acquired by the employee. Accordingly,
the employer is not required to file a
return and furnish an information
statement to the employee (pursuant to
section 6039(a)(2) and (b)) with respect
to such transfer of the stock to the
employee. Instead, the employer is
required to file a return and furnish an
information statement to the employee
with respect to the first transfer of the
legal title of the stock acquired by the
employee (for example, when the
employee sells the stock or transfers the
stock to a brokerage account established
on behalf of the employee).
Consequently, if a stock certificate is
issued or the ownership of the shares is
registered on the employer’s record
books following the exercise of an
option, the exercise of the option and
the first transfer of legal title occur on
different dates, unless the shares are
immediately sold or otherwise
transferred. Accordingly, in such a case,
the dates to be provided under
§§ 1.6039–1(b)(1)(vii) (the date the
option was exercised) and (ix) (the date
legal title was first transferred) will be
different.
b. Reporting of Information With
Respect to the Special Tax Rule Under
Section 423(c)
Acknowledging that one of the
primary purposes of these regulations is
to provide information to employees for
purposes of computing their tax liability
with respect to the disposition of shares
acquired pursuant to statutory options,
commenters suggested that the return
and information statement provided
with respect to options granted under an
employee stock purchase plan contain
additional information necessary to
calculate the tax liability in the case of
a qualifying disposition of the stock.
Under section 423(a), a qualifying
disposition occurs if the stock acquired
under an employee stock purchase plan
is disposed of no earlier than two years
after the date of grant of the option and
one year after the date of exercise of the
option.
Section 423(c) provides a special rule
for calculating the timing and amount of
compensation income that must be
recognized in the event of a qualifying
disposition when the exercise price is
less than 100 percent of the value of a

VerDate Nov<24>2008

15:56 Nov 16, 2009

Jkt 220001

share on the date of grant. Generally, the
compensation income recognized is the
lesser of: (a) The excess of the fair
market value of the share on the date of
grant over the exercise price, and (b) the
excess of the fair market value of a share
at the time of disposition (or death) over
the price paid per share. The flush
language of section 423(c) provides that
if the exercise price is not known on the
date of grant, the exercise price shall be
determined as if the option were
exercised on the date of grant.
There are various circumstances
under which the exercise price will not
be known on the date of grant. For
example, the exercise price will not be
known on the date of grant if the
exercise price is equal to the lesser of 85
percent of the fair market value of the
stock on the date of grant or 85 percent
of the fair market value of the stock on
the date of exercise. In addition, the
exercise price will not be known on the
date of grant if the exercise price is
calculated based on a certain percentage
(not less than 85 percent) of the fair
market value of the stock on the date of
exercise. In order to compute the tax
liability resulting from a qualifying
disposition of the stock acquired using
either of the foregoing pricing formulas,
the employee needs to know the
exercise price determined as if the
option were exercised on the date of
grant of the option.
In response to the comments, these
final regulations modify the proposed
regulations by adding § 1.6039–1(b)(vi)
to these final regulations. If the exercise
price per share of an option is not fixed
or determinable on the date the option
was granted to the employee, § 1.6039–
1(b)(vi) of these final regulations
requires corporations to include in the
return and information statement the
exercise price per share determined as
if the option were exercised on the date
of grant.
c. Requirement of Return and
Information Statement Under Section
6039(a)(2) and (b)
Commenters asked for clarification
regarding whether the return and
information statement requirements of
section 6039(a)(2) and (b) apply only to
the transfer of shares pursuant to a
qualifying disposition. Section
6039(a)(2) requires that an information
return be filed by every corporation
which in any calendar year records (or
has by its agent recorded) a transfer of
the legal title of a share of stock
acquired by the transferor pursuant to
his or her exercise of an option
described in section 423(c). The IRS and
the Treasury Department have
concluded that the reference in section

PO 00000

Frm 00057

Fmt 4700

Sfmt 4700

59089

6039(a)(2) to an option described in
423(c) relates to the exercise price of the
option (as evidenced by the
parenthetical phrase in 6039(a)(2)
following the reference to section
423(c)) rather than whether or not the
shares are disposed of in a qualifying
disposition as also described in 423(c).
Furthermore, section 6039(c)(2)
provides that the return and information
statement requirements of section
6039(a)(2) and (b) are triggered by the
first transfer of the legal title of the
shares. This provision would be
unnecessary if section 6039(a)(2) only
applied to qualifying dispositions.
Therefore, these final regulations
provide that the return and information
statement requirements are not
dependent upon whether such transfer
of legal title is a qualifying or
disqualifying disposition.
Commenters also asked for
clarification regarding whether the
return and information statement
requirements of section 6039(a)(2) and
(b) only apply to the transfer of shares
acquired pursuant to an option
described in section 423(c) where the
exercise price is less than 100 percent
of the value of a share on the date of
grant. These final regulations provide
that the return and information
statement requirements of section
6039(a)(2) and (b) also apply to the
transfer of shares acquired pursuant to
an option where the exercise price is not
fixed or determinable on the date of
grant, as well as to the transfer of shares
acquired pursuant to an option
described in section 423(c) where the
exercise price is less than 100 percent
of the value of a share on the date of
grant.
4. Nonresident Aliens
Several commenters suggested that
the return and information statement
requirements of section 6039 should not
apply to nonresident aliens (as defined
in section 7701(b)) who perform
services outside the United States.
These commenters point out that the
reported information may not be useful
to nonresident aliens because they
likely will not have any U.S. tax
liability.
In response to comments, these final
regulations modify the proposed
regulations by adding § 1.6039–1(e)
which provides an exception to the
return requirements of section 6039(a)
for certain nonresident aliens. With
respect to incentive stock options, the
return requirement of section 6039(a)(1)
is not applicable to the exercise of an
incentive stock option by an employee
who is a nonresident alien and to whom
the corporation is not required to

E:\FR\FM\17NOR1.SGM

17NOR1

59090

Federal Register / Vol. 74, No. 220 / Tuesday, November 17, 2009 / Rules and Regulations

provide a Form W–2, Wage and Tax
Statement (or its designated successor)
for any calendar year within the time
period beginning with the first day of
the calendar year in which the option
was granted to the employee and ending
on the last day of the calendar year in
which the employee exercised the
incentive stock option. With respect to
employee stock purchase plans, the
return requirement of section 6039(a)(2)
is not applicable to the first transfer of
legal title of a share of stock by an
employee who is a nonresident alien
and to whom the corporation is not
required to provide a Form W–2 for any
calendar year within the time period
beginning with the first day of the
calendar year in which the option was
granted to the employee and ending on
the last day of the calendar year in
which the employee first transferred
legal title to shares acquired under the
option. For purposes of § 1.6039–1(e) of
these final regulations, the term
corporation is defined in section 7701(a)
and includes, but is not limited to, the
corporation issuing the stock, a related
corporation of the corporation, any
agent of the corporation, any party
distributing shares of stock or other
payments in connection with the plan
(for example, a brokerage firm), and any
party in control of the payment of
remuneration for employment to the
employee.

jlentini on DSKJ8SOYB1PROD with RULES

5. Forms To Satisfy the Return and
Information Statement Requirements
Returns required by § 1.6039–1(a) of
these final regulations and information
statements required by § 1.6039–2(a) of
these final regulations must be made
using Form 3921, Exercise of an
Incentive Stock Option Under Section
422(b) (or its designated successor) and
filed in the manner provided in the
instructions thereto. Returns required by
§ 1.6039–1(b) of these final regulations
and information statements required by
§ 1.6039–2(b) of these final regulations
must be made using Form 3922,
Transfer of Stock Acquired Through an
Employee Stock Purchase Plan under
Section 423(c) (or its designated
successor) and filed in the manner
provided in the instructions thereto.
Section 1.6039–1(c) of the proposed
regulations provided that Forms 3921
and 3922 must be filed on or before
January 31 of the year following the year
for which the return and statement are
required. Section 1.6039–1(c) of these
final regulations has been revised to
provide that Forms 3921 and 3922 must
be filed in accordance with the
guidelines and procedures set forth in
the instructions to Forms 3921 and

VerDate Nov<24>2008

15:56 Nov 16, 2009

Jkt 220001

3922. The IRS expects to release Forms
3921 and 3922 in the near future.
Several commenters suggested that
taxpayers be allowed to satisfy the
information statement requirements of
§ 1.6039–2(a) and (b) of these final
regulations by delivering a substitute
form that includes all of the information
required to be included on the Forms
3921 or 3922, as applicable. Taxpayers
may satisfy the return requirements of
§ 1.6039–1(a) and (b) as well as the
information statement requirements of
§ 1.6039–2(a) and (b) by submitting
substitute Forms 3921 and 3922 in
accordance with the guidelines set forth
in Publication 1179 (or its designated
successor). For example, it would be
permissible for a taxpayer to satisfy the
return requirements of § 1.6039–1(a) and
(b) by submitting Forms 3921 and 3922
to the IRS, and satisfy the information
statement requirements of § 1.6039–2(a)
and (b) by delivering substitute Forms
3921 and 3922 to the appropriate
recipients in accordance with the
guidelines set forth in Publication 1179
(or its designated successor).
Effective/Applicability Date
These final regulations will apply as
of January 1, 2007. However, taxpayers
are not required to comply with the
return requirements of § 1.6039–1(a) and
(b) of these final regulations for stock
transfers that occur during the 2007,
2008 and 2009 calendar years.
Notwithstanding the waiver of the
return requirements for 2007, 2008 and
2009 stock transfers, taxpayers must
furnish information statements to
employees for such stock transfers. For
purposes of furnishing information
statements for stock transfers that occur
during the 2007 or 2008 calendar years,
taxpayers may rely on § 1.6039–1 of the
2004 final regulations (69 FR 46401) or
§ 1.6039–2 of the 2008 proposed
regulations (REG–103146–08) (73 FR
40999). For purposes of furnishing
information statements for stock
transfers that occur during the 2009
calendar year, taxpayers may rely on
§ 1.6039–1 of the 2004 final regulations
(69 FR 46401), § 1.6039–2 of the 2008
proposed regulations (REG–103146–08)
(73 FR 40999), or these final regulations.
Special Analyses
It has been determined that this
Treasury decision is not a significant
regulatory action as defined in
Executive Order 12866. Therefore, a
regulatory assessment is not required. It
is hereby certified that the regulations
will not have a significant economic
impact on a substantial number of small
entities. This certification is based on
the fact that the filing of a return with

PO 00000

Frm 00058

Fmt 4700

Sfmt 4700

the IRS and the provision of employee
statements required under this Treasury
decision will impose a minimal
administrative burden on small entities.
It is estimated that it will take
approximately 30 minutes to prepare
and provide the information required by
these regulations. Further, the
information to be provided is readily
available. Therefore, an analysis under
the Regulatory Flexibility Act (5 U.S.C.
chapter 6) is not required. Pursuant to
section 7805(f) of the Internal Revenue
Code, the notice of proposed rulemaking
that preceded these regulations was
submitted to the Chief Counsel for
Advocacy of the Small Business
Administration for comment on its
impact on small business.
Drafting Information
The principal authors of these
regulations are Thomas Scholz and Ilya
Enkishev, Office of the Division
Counsel/Associate Chief Counsel (Tax
Exempt and Government Entities).
However, other personnel from the IRS
and Treasury Department participated
in their development.
List of Subjects in 26 CFR Part 1
Income taxes, Reporting and
recordkeeping requirements.
Adoption of Amendments to the
Regulations
Accordingly, 26 CFR part 1 is
amended as follows:

■

PART 1—INCOME TAXES
Paragraph 1. The authority citation
for part 1 continues to read in part as
follows:

■

Authority: 26 U.S.C. 7805.

Par. 2. Section 1.6039–1 is revised to
read as follows:

■

§ 1.6039–1 Returns required in connection
with certain options.

(a) Requirement of return with respect
to incentive stock options under section
6039(a)(1). (1) Every corporation which
in any calendar year transfers to any
person a share of stock pursuant to such
person’s exercise of an incentive stock
option shall, for such calendar year, file
a return with respect to each transfer
made during such year. This return
must include the following
information—
(i) The name, address, and employer
identification number of the corporation
transferring the stock;
(ii) If other than the corporation
identified in paragraph (a)(1)(i) of this
section, the name, address and
employer identification number of the

E:\FR\FM\17NOR1.SGM

17NOR1

jlentini on DSKJ8SOYB1PROD with RULES

Federal Register / Vol. 74, No. 220 / Tuesday, November 17, 2009 / Rules and Regulations
corporation whose stock is being
transferred;
(iii) The name, address, and
identifying number of the person to
whom the share or shares of stock were
transferred pursuant to the exercise of
the option;
(iv) The date the option was granted
to the person;
(v) The exercise price per share;
(vi) The date the option was exercised
by the person;
(vii) The fair market value of a share
of stock on the date the option was
exercised by the person; and
(viii) The number of shares of stock
transferred to the person pursuant to the
exercise of the option.
(2) Each return required by this
paragraph (a) shall be made on Form
3921, Exercise of an Incentive Stock
Option Under Section 422(b) (or its
designated successor) and shall be filed
in such manner as provided in the
instructions thereto.
(b) Requirement of return with respect
to stock purchased under an employee
stock purchase plan under section
6039(a)(2). (1) Every corporation which
in any calendar year records, or has by
its agent recorded, a transfer of the legal
title of a share of stock acquired by the
transferor (person who acquires the
shares pursuant to the exercise of the
option) pursuant to the transferor’s
exercise of an option granted under an
employee stock purchase plan as
described in section 423(c) and where
the exercise price is less than 100
percent of the value of the stock on date
of grant or is not fixed or determinable
on the date of the grant, shall, for such
calendar year, file a return with respect
to each transfer made during such year.
This return must include the following
information—
(i) The name, address, and identifying
number of the transferor;
(ii) The name, address and employer
identification number of the corporation
whose stock is being transferred;
(iii) The date the option was granted
to the transferor;
(iv) The fair market value of the stock
on the date the option was granted;
(v) The actual exercise price paid per
share;
(vi) The exercise price per share
determined as if the option were
exercised on the date the option was
granted to the transferor (to be provided
only if the exercise price per share is not
fixed or determinable on the date the
option was granted);
(vii) The date the option was
exercised by the transferor;
(viii) The fair market value of the
stock on the date the option was
exercised by the transferor;

VerDate Nov<24>2008

15:56 Nov 16, 2009

Jkt 220001

(ix) The date the legal title of the
shares was transferred by the transferor
(see paragraph (b)(3) of this section);
and
(x) The number of shares to which
legal title was transferred by the
transferor.
(2) Each return required by this
paragraph (b) shall be made on Form
3922, Transfer of Stock Acquired
Through an Employee Stock Purchase
Plan Under Section 423(c) (or its
designated successor) and shall be filed
in such manner as provided in the
instructions thereto.
(3) A return is required by reason of
a transfer described in section 6039(a)(2)
only with respect to the first transfer of
legal title of the shares by the transferor,
including the first transfer of legal title
to a recognized broker or financial
institution. If a contractual agreement
exists or is entered into with a
recognized broker or financial
institution pursuant to which shares
acquired upon exercise of the option
will be immediately deposited into a
brokerage account established on behalf
of the transferor, then the deposit of
shares by the transferor into the
brokerage account following the
exercise of the option is the first transfer
of legal title of the shares acquired by
the transferor, and the corporation is
only required to file a return relating to
such transfer of legal title.
(4) Every corporation that transfers
any share of stock pursuant to the
exercise of an option described in this
paragraph shall identify such stock in a
manner sufficient to enable the accurate
reporting of the transfer of legal title to
such shares. Such identification may be
accomplished by assigning to the
certificates of stock issued pursuant to
the exercise of such options a special
serial number or color.
(c) Time for filing returns. Each return
required by this section for a calendar
year must be filed in accordance with
the guidelines and procedures set forth
in the instructions to Form 3921 and
Form 3922.
(d) Penalty. For provisions relating to
the penalty applicable to the failure to
file a return under this section, see
section 6721.
(e) Exception to return requirements
of section 6039(a) for certain
nonresident aliens—(1) Return
requirement under section 6039(a)(1).
The return requirement of section
6039(a)(1) is not applicable to the
exercise of an incentive stock option by
an employee who is a nonresident alien
(as defined in section 7701(b)) and to
whom the corporation is not required to
provide a Form W–2, Wage and Tax
Statement (or its designated successor)

PO 00000

Frm 00059

Fmt 4700

Sfmt 4700

59091

for any calendar year within the time
period beginning with the first day of
the calendar year in which the option
was granted to the employee and ending
on the last day of the calendar year in
which the employee exercised the
option.
(2) Return requirement under section
6039(a)(2). The return requirement of
section 6039(a)(2) is not applicable to
the first transfer of legal title of a share
of stock by an employee who is a
nonresident alien (as defined in section
7701(b)) and to whom the corporation is
not required to provide a Form W–2 for
any calendar year within the time
period beginning with the first day of
the calendar year in which the option
was granted to the employee and ending
on the last day of the calendar year in
which the employee first transferred
legal title to shares acquired under the
option as described in paragraph (b)(3)
of this section.
(3) For purposes of this paragraph (e),
the term corporation is defined in
section 7701(a) and includes, but is not
limited to, the corporation issuing the
stock, a related corporation of the
corporation, any agent of the
corporation, any party distributing
shares of stock or other payments in
connection with the plan (for example,
a brokerage firm), and any party in
control of the payment of remuneration
for employment to the employee.
(f) Effective/applicability date—(1) In
general. This section is effective on
November 17, 2009. This section will
apply as of January 1, 2007.
(2) Transition period. Taxpayers are
not required to comply with the return
requirements of paragraphs (a) and (b) of
this section for stock transfers that occur
during the 2007, 2008 and 2009
calendar years.
■ Par. 3. A new § 1.6039–2 is added to
read as follows:
§ 1.6039–2 Statements to persons with
respect to whom information is reported.

(a) Requirement of statement with
respect to incentive stock options under
section 6039(b). (1) Every corporation
filing a return under § 1.6039–1(a) shall
furnish to each person whose name is
set forth in such return a written
statement with respect to the transfer or
transfers made to such person during
such year. This statement must include
the information described in § 1.6039–
1(a)(1).
(2) Each statement required by this
paragraph (a) to be furnished to any
person must be furnished to such
person on Form 3921, Exercise of an
Incentive Stock Option Under Section
422(b) (or its designated successor) and
be delivered at such time and in such

E:\FR\FM\17NOR1.SGM

17NOR1

jlentini on DSKJ8SOYB1PROD with RULES

59092

Federal Register / Vol. 74, No. 220 / Tuesday, November 17, 2009 / Rules and Regulations

manner as provided in the instructions
thereto.
(b) Requirement of statement with
respect to stock purchased under an
employee stock purchase plan under
section 6039(a)(2). (1) Every corporation
filing a return under § 1.6039–1(b) shall
furnish to each person whose name is
set forth in such return a written
statement with respect to the transfer or
transfers made by such person during
such year. This statement must include
the information described in § 1.6039–
1(b)(1).
(2) Each statement required by this
paragraph (b) to be furnished to any
person must be furnished to such
person on Form 3922, Transfer of Stock
Acquired Through an Employee Stock
Purchase Plan Under Section 423(c) (or
its designated successor) and be
delivered at such time and in such
manner as provided in the instructions
thereto.
(3) If the statement required by this
paragraph is made by the authorized
transfer agent of the corporation, it is
deemed to have been made by the
corporation. The term transfer agent, as
used in this section, means any designee
authorized to keep the stock ownership
records of a corporation and to record a
transfer of title of the stock of such
corporation on behalf of such
corporation.
(c) Time for furnishing statements—
(1) In general. Each statement required
by this section to be furnished to any
person for a calendar year must be
furnished to such person on or before
January 31 of the year following the year
for which the statement is required.
(2) Extension of time. An extension of
time to furnish statements required by
this section may be granted in
accordance with the guidelines and
procedures set forth in the instructions
to Form 3921 and Form 3922.
(d) Penalty. For provisions relating to
the penalty applicable to the failure to
furnish a statement under this section,
see section 6722.
(e) Effective/applicability date—(1) In
general. This section is effective on
November 17, 2009. This section will
apply as of January 1, 2007.
(2) Reliance and transition period.
Notwithstanding § 1.6039–1(g),
corporations must furnish information
statements to employees in accordance
with this section for stock transfers that
are subject to § 1.6039–1(a) and (b), and
occur during the 2007, 2008 and 2009
calendar years. For purposes of
furnishing information statements for
stock transfers that occur during the
2007 or 2008 calendar years, taxpayers
may rely on § 1.6039–1 of the 2004 final
regulations (69 FR 46401) or § 1.6039–

VerDate Nov<24>2008

15:56 Nov 16, 2009

Jkt 220001

2 of the 2008 proposed regulations
REG–103146–08 (73 FR 40999). For
purposes of furnishing information
statements for stock transfers that occur
during the 2009 calendar year, taxpayers
may rely on § 1.6039–1 of the 2004 final
regulations (69 FR 46401), § 1.6039–2 of
the 2008 proposed regulations (REG–
103146–08) (73 FR 40999), or this
section.
Linda E. Stiff,
Deputy Commissioner for Services and
Enforcement.
Approved: November 9, 2009.
Michael Mandaca,
Acting Assistant Secretary of the Treasury
(Tax Policy).
[FR Doc. E9–27451 Filed 11–16–09; 8:45 am]
BILLING CODE 4830–01–P

DEPARTMENT OF LABOR
Employee Benefits Security
Administration
29 CFR 2550
RIN 1210–AB13

Investment Advice—Participants and
Beneficiaries
AGENCY: Employee Benefits Security
Administration, Labor.
ACTION: Final rule; delay of effective and
applicability date.
SUMMARY: This document delays the
effective and applicability dates of final
rules under the Employee Retirement
Income Security Act, and parallel
provisions of the Internal Revenue Code
of 1986, relating to the provision of
investment advice to participants and
beneficiaries in individual account
plans, such as 401(k) plans, and
beneficiaries of individual retirement
accounts (and certain similar plans).
These rules were published in the
Federal Register on January 21, 2009.
The effective and applicability dates of
the final rules were deferred until
November 18, 2009, in order to permit
a review of policy and legal issues
raised with respect to the rules. This
document further delays the effective
and applicability dates of these final
rules from November 18, 2009, until
May 17, 2010, to allow additional time
for the Department to complete its
analysis of questions of law and policy
concerning the rules.
DATES: The effective and applicability
date of the rule amending 29 CFR Part
2550, published January 21, 2009, at 74
FR 3822, delayed March 20, 2009, at 74
FR 11847, and May 22, 2009, at 74 FR

PO 00000

Frm 00060

Fmt 4700

Sfmt 4700

23951, is further delayed until May 17,
2010.
FOR FURTHER INFORMATION CONTACT: Fred
Wong, Office of Regulations and
Interpretations, Employee Benefits
Security Administration (EBSA), (202)
693–8500. This is not a toll-free number.
SUPPLEMENTARY INFORMATION:
On January 21, 2009, the Department
of Labor published final rules on the
provision of investment advice to
participants and beneficiaries of
participant-directed individual account
plans and to beneficiaries of individual
retirement accounts and certain similar
plans (IRAs) (74 FR 3822). The rules
implement a statutory prohibited
transaction exemption under ERISA
Sec. 408(b)(14) and Sec. 408(g), and
under section 4975 of the Internal
Revenue Code of 1986 (Code),1 and also
contain an administrative class
exemption granting additional relief. As
published, these rules were to be
effective on March 23, 2009. Paragraph
(g) of Sec. 2550.408g–1 provided that
the rule would apply to covered
transactions occurring on or after March
23, 2009.
By memorandum dated January 20,
2009, Rahm Emanuel, Assistant to the
President and Chief of Staff, directed
Agency Heads to consider extending for
60 days the effective date of regulations
that have been published in the Federal
Register but not yet taken effect. The
memorandum further advised that,
where such regulations are extended,
agencies should allow 30 days for
interested persons to comment on issues
of law and policy raised by the rules. In
accordance with that memorandum, and
taking into account the considerations
listed in the Memorandum of January
21, 2009, from Peter R. Orszag, Director
of the Office of Management and
Budget, the Department published in
the Federal Register on February 4,
2009, a document seeking comment on
a proposed 60-day extension of the
effective dates for these rules until May
22, 2009, and a proposed conforming
amendment to the applicability date of
Sec. 2550.408g–1 (74 FR 6007). The
document also requested comment on
issues of law and policy raised by the
final rules. The Department indicated
that upon completion of its review, it
might decide to allow the rules to take
effect, issue a further extension,
withdraw the rules, or propose
amendments, and solicited comment on
each of these possible outcomes. In
response to this invitation, the
Department received 28 comment
1 These provisions were added to ERISA and the
Code by the Pension Protection Act of 2006 (PPA),
Public Law 109–280, 120 Stat. 780 (Aug. 17, 2006).

E:\FR\FM\17NOR1.SGM

17NOR1