ReformAMT Group Wins, Gets Stock Option AMT Relief included in Bailout Bill

ReformAMT Group Wins, Gets Stock Option AMT Relief included in Bailout Bill

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Here is the headline that ReformAMT ran the day President Bush signed into law the Emergency Economic Stabilization Act of 2008:

OCTOBER 3, 3:15pm (EST)

FINALLY, IT’S OVER!!!

And this is from the Wall Street Journal’s Scott Thurm by way of TaxProf Blog’s Paul Caron

The recent $700 billion rescue package to bolster the financial system also threw a lifeline to thousands of people who owed taxes on stock options dating to the technology-stock crash of 2000. Some individual tax bills exceeded $1 million for shares that later plunged in value. A five-paragraph section tucked into the bailout bill effectively erased those taxes, at an estimated cost to the Treasury of $2.3 billion.

According to the (San Jose) Mercury News, tech workers in the Silicon Valley had been so adversely affected by the anamolous operation (taxation of wealth that never accrued) of the Alternative Minimum Tax on their Dot Com stock options that over 3,000 of them formed a group called ReformAMT    

The legislation was a huge victory for ReformAMT, a grass-roots group launched in March 2001 by Jeff Chou, a Cisco hardware engineer, and Jay Cena, who left his job at Network Appliance to manage the campaign. The group had its first meeting that month at Ariba and at its peak had about 3,000 members.  

Estimates of the number of people affected by the tax vary, but they are said to number in the tens of thousands, concentrated in the high-tech centers of the country. About $2.3 billion in taxes and penalties will be returned to them or forgiven over the next two years, according to a congressional analysis. 

“Many people had to take out second mortgages to pay for this,” Chou said. “In San Mateo, we had someone who committed suicide over this.”

Here is ReformAMT’s summary of the retroactive relief provisions of the law:

If you owe money because of the stock option AMT:

ALL liabilities associated with Incentive stock option (ISO)-AMT from before January 1, 2008 are abated (i.e. – if you owe money from ISO-AMT that happened in tax year 2007 and before, you now owe nothing).

If you already paid money because of the stock option AMT:

Your refund gets increased by how much you have already paid, including penalties and interest. In 2008, your refund gets increased by 50% of how much you paid; then in 2009, your refund gets increased by 50% of how much you paid. ie – it takes 2 years for you to get a refund of what you have paid.

About Peter Pappas

Peter is a tax attorney and certified public acccountant with over 20 years experience helping taxpayers resolve their IRS and state tax problems.

He has represented thousands of taxpayers who have been experiencing difficulty dealing with the Internal Revenue Service or State tax officials.

He is a member of the American Association of Attorney-Certified Public Accountants, the Florida Bar Association and The Florida Institute of Certified Public Accountants and is admitted to practice before the United States Tax Court, the United States Supreme Court, U.S. District Courts - Middle District of Florida

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  1. […] * Peter Pappas brings us some good news from the recent “Don’t Call it a Bailout” Act for those who owe, or would owe, dreaded ATM on stock options in his post “ReformAMT Group Wins, Get’s Stock Option AMT Relief included in Bailout Bill”. […]

  2. […] ReformAMT Group Wins, Gets Stock Option AMT Relief Included in Bailout Bill […]