Global

Details

  • Service: Tax, Global Transfer Pricing Services, Global Compliance Management Services
  • Type: Regulatory update
  • Date: 3/22/2013

United States - Revised stock-based compensation allowed under cost-sharing arrangement 

March 22: The IRS today publicly released a private letter ruling* granting the taxpayer’s request to change its method for measuring stock-based compensation—e.g., employee stock options, restricted shares or restricted share units—for purposes of determining the amounts to be included by the taxpayer as intangible development costs for purposes of its cost-sharing arrangement.


*Private letter rulings are taxpayer-specific rulings furnished by the IRS National Office in response to requests made by taxpayers and can only be relied upon by the taxpayer to whom issued. It is important to note that, pursuant to section 6110(k)(3), such items cannot be used or cited as precedent. Nonetheless, such rulings can provide useful information about how the IRS may view certain issues.

In PLR 201312024 [PDF 60 KB] (released March 22, 2013, and dated December 18, 2012), the IRS granted prospective consent for the taxpayer to change to:


  • The elective method for measuring and timing of employee stock options, restricted shares, or restricted share units for purposes of determining the amount that the taxpayer must include as intangible development costs
  • Period-by-period identification of stock-based compensation for purposes of intangible development costs

The IRS concluded that if the taxpayer were to adopt the elective method and period-by-period identification, the taxpayer would have to make a written election in its cost sharing arrangement within 60 days from the date of this letter ruling.



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