On July 26, 2016, the IRS issued final regulations that modify the filing requirements for taxpayers making Section 83(b) elections. Service providers who receive restricted stock or other property that is subject to substantial risk of forfeiture generally don’t pay income tax on the receipt of the property. The property is subject to income tax when the restrictions have lapsed and the property is no longer subject to substantial risk of forfeiture. However, an election can be made under Section 83(b) to treat the property as taxable upon receipt regardless of its status.
Under the previous regulations taxpayers were required to do the following to perfect their 83(b) election:
- File the original of the properly executed 83(b) with the IRS within no later than 30 days of receipt of the property.
- File a copy of the 83(b) election with their income tax return for the year of transfer.
- Provide a copy of the 83(b) election to the person for whom the services were performed.
The new regulations eliminate the need to file a copy of the 83(b) election with the service provider’s income tax return for the year.
The final regulations are effective for property transfers on or after Jan. 1, 2016, but may be relied on for elections with respect to property transferred on or after Jan. 1, 2015.