IRS Issues New Forms Regarding Stock Transfers

The Internal Revenue Service (“IRS”) has recently issued Form 3921, “Exercise of an Incentive Stock Option Under Section 422(b),” and Form 3922, “Transfer of Stock Acquired Through An Employee Stock Purchase Plan Under Section 423(c).” These forms provide for the disclosure of information required by the 2006 Tax Relief and Health Care Act (“Act”) regarding transfers of stock pursuant to the exercise of an incentive stock option (“ISO”) or an employee stock purchase plan (“ESPP”). The forms are effective and required for stock transfers occurring after 2009.

Background
The Act amended the information reporting requirements in Internal Revenue Code (“Code”) Section 6039. Prior to the amendment, Code 6039 generally required corporations to provide a written statement to each employee regarding the corporation’s transfer of stock pursuant to the exercise of an ISO and under an ESPP on or before January 31 of the year following the year for which the statement is required. Under the Act, corporations are required to file an information return with the IRS in addition to providing employees with the information statement.

In Notice 2008-8, the IRS waived the obligation to file an information return for stock transfers in 2007, although corporations were still required to furnish the information to employees. In July of 2008, the IRS issued proposed regulations and waived the requirement to file with the IRS for transfers during the 2007 and 2008. In November of 2009, the IRS issued final regulations that further postponed the required reporting to the IRS until 2010.