Global

Details

  • Service: Tax, Global Transfer Pricing Services, Global Compliance Management Services
  • Type: Regulatory update
  • Date: 3/15/2013

United States - Stock-based compensation changes allowed under cost-sharing arrangements 

March 15: The IRS today publicly released  two private letter rulings* in which the IRS granted taxpayers’ requests to change their methods for measuring stock-based compensation—e.g., employee stock options, restricted shares and performance-based restricted stock—for purposes of determining the amounts to be included by the taxpayers as intangible development costs for purposes of their cost-sharing arrangements.

*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 201311001 [PDF 62 KB] (released March 15, 2013, and dated December 17, 2012), the IRS granted prospective consent for the taxpayer to change its methods for measuring, timing, and identifying stock-based compensation for purposes of determining the amount to include as intangible development costs in the taxpayer’s cost-sharing arrangement. The PLR authorizes the taxpayer to use the elective method and period-by-period identification for these purposes.


  • Similarly, in PLR 201311018 [PDF 60 KB] (released March 15, 2013, and dated December 12, 2012), the IRS granted the taxpayer’s request for consent to change prospectively to the elective method and period-by-period identification, for purposes of determining stock-based compensation to be included as an intangible development cost, which the taxpayer must share for purposes of its cost-sharing arrangement.


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