Employee options count for research credit.Certain Apple Computer employees were granted nonstatutory stock options. During 1982 and 1983, the employees exercised the options after Apple's stock price rose precipitously pre·cip·i·tous adj. 1. Resembling a precipice; extremely steep. See Synonyms at steep1. 2. Having several precipices: a precipitous bluff. 3. . Apple included the spread-the stock's market price minus the employee's option price-as wages for employee withholding Withholding Any tax that is taken directly out of an individual's wages or other income before he or she receives the funds. Notes: In other words, these funds are "withheld" from your wages. purposes and deducted de·duct v. de·duct·ed, de·duct·ing, de·ducts v.tr. 1. To take away (a quantity) from another; subtract. 2. To derive by deduction; deduce. v.intr. the spread as wages on its corporate tax return. Apple also treated the spreads as wages in calculating the credit for increasing research (currently, IRC (Internet Relay Chat) Computer conferencing on the Internet. There are hundreds of IRC channels on numerous subjects that are hosted on IRC servers around the world. After joining a channel, your messages are broadcast to everyone listening to that channel. section 41; at the time, section 44F). The IRS An abbreviation for the Internal Revenue Service, a federal agency charged with the responsibility of administering and enforcing internal revenue laws. disallowed portions of the claimed credit ($12 million in 1982 and $21 million in 1983), claiming the spreads did not qualify as wages for that purpose. Section 41(b)(2)(A) allows employers to include "any wages paid or incurred to an employee for qualified services" in calculating the credit. (The employees who exercised the options were performing qualified services.") "Wages" are defined [in section 41(b)(2)(D)] by reference to IRC section 3401, dealing with wage withholding. Under section 3401, the spreads clearly are wages. But despite this, the IRS claimed Congress did not intend the spreads to be included in the credit calculation. The spreads, it argued, resulted from the fortuities of the stock market and had nothing to do with increased research spending. Result: For Apple. The Tax Court agreed the spreads did not represent increased research spending but could not go against the statute's plain language, under which spreads on the exercise of employee options were definitely wages" when calculating the credit. Redrafting statutes must be done by Congress, not the courts. Notes: (1) The credit for increasing research is scheduled to expire expire /ex·pire/ (ek-spi´er) 1. to exhale. 2. to die. ex·pire v. 1. To breathe one's last breath; die. 2. To exhale. at the end of June June: see month. 1993. However, proposed legislation would make it permanent. (2) Although the credit has been changed by Congress since the tax years involved in this case, the statutory language the court interpreted [Sections 41(b)(2)(A) and (D)] remains the same. * Apple Computer, Inc. 98 (TC No. 18). |
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