Current through August 31, 2023
Section
63-3026A(3),
Idaho Code
01.
In
General. The granting of stock options is considered to be compensation
for services. Although considered as compensation, in some circumstances the
taxpayer may report the compensation on his federal income tax return as
capital gain income. The character of the income from the granting of stock
options and the timing of reporting it for federal income tax purposes apply in
computing Idaho taxable income. (4-6-23)
02.
Definitions. For purposes of
this rule: (4-6-23)
a. Workdays, Idaho
workdays, and total workdays are defined in Rule
270 of these rules.
(4-6-23)
b. Compensable period
means the period that begins at the date the stock option is granted and ends
at the earlier of the date the stock option becomes vested or the date the
employee's services terminate. (4-6-23)
c. Statutory stock options are options
governed by specific Internal Revenue Code sections that impose restrictions on
both the employer and the employee. Statutory stock options include incentive
stock options as provided in Section
422, Internal Revenue Code, and
options issued pursuant to employee stock purchase plans as provided in Section
423, Internal Revenue Code.
(4-6-23)
d. Nonstatutory stock
options are options that do not meet the Internal Revenue Code requirements to
qualify as statutory stock options or are granted pursuant to a plan or
offering that does not qualify. (4-6-23)
03.
Compensation for Future
Services. The granting of stock options will be presumed to be intended
as compensation for future services. The party alleging otherwise bears the
burden of proving that the stock options were intended for services rendered
before the date of grant. (4-6-23)
04.
Statutory Stock Options.
(4-6-23)
a. Compensation. Compensation is
realized at the date the option is exercised, but not taxable until the income
or gain is recognized for federal income tax purposes. If a taxpayer reports a
capital gain for federal income tax purposes from statutory stock options, the
amount of Idaho source compensation will also be reported as capital gain
income for Idaho income tax purposes. Idaho source compensation is determined
as follows: (4-6-23)
i. Compensation is equal
to the portion of the gain that equals the difference between the option price
and the fair market value of the stock at the date the option was exercised.
Compensation is limited to the gain actually recognized if the stock is sold
for less than its fair market value at the time the option was exercised. No
compensation will be reported if the stock is sold at a loss.
(4-6-23)
ii. Compensation for
services performed in Idaho equals the compensation determined in Subsection
271.04.a.i., multiplied by
the ratio of Idaho workdays to total workdays during the compensable period.
(4-6-23)
b. Investment
Income. Appreciation in the value of the stock after the date the option was
exercised is to be reported as investment income and sourced to the taxpayer's
domicile at the date the stock was sold. (4-6-23)
05.
Nonstatutory Stock Options.
(4-6-23)
a. Compensation. Compensation is
recognized at the date the stock option is exercised. The amount of Idaho
source compensation related to the stock option is determined as follows:
(4-6-23)
i. Compensation for federal income
tax purposes is equal to the difference between the option price and the fair
market value of the stock at the date the option was exercised.
(4-6-23)
ii. Compensation for
services performed in Idaho equals the compensation determined in Subsection
271.05.a.i., multiplied by
the ratio of Idaho workdays to total workdays during the compensable period.
(4-6-23)
b. Investment
Income. Appreciation or depreciation in the value of the stock after the date
the option was exercised is to be reported as investment income and sourced to
the taxpayer's domicile at the date the stock was sold.
(4-6-23)
