IRS Waives ISO and ESPP Reporting Requirements for 2007; Employers Must Provide Information Statements to Employees

As discussed in our LawFlash issued December 11, 2007, Section 6039 of the Internal Revenue Code of 1986, as amended (the Code), sets forth two reporting requirements for employers sponsoring incentive stock option plans (ISOs) or employee stock purchase plans (ESPPs): (1) a requirement that the employer provide the employee a summary of important details with respect to stock transfers in connection with an ISO or an ESPP (the Employee Information Statement), and (2) a requirement that the employer provide an information return to the Internal Revenue Service (IRS) setting forth the comparable information (the Information Return). Specific information regarding the contents of the Employee Information Statement and the Information Return is set forth in our December 11 LawFlash.

The requirement that employers provide each affected employee with an Employee Information Statement has been in the Code for some time. The Information Return requirement, however, was added in 2006, and the IRS has not yet issued guidance implementing the requirement.

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