[bzax]

If you do an 83b election on RSUs, you'd recognize the entire present value of the RSU grant as income in that year, and pay taxes on it. I believe you're then limited to claiming capital losses on that if you leave before it all vests, or it all ends up worthless.

Stripe was already worth $9B in 2016. If you joined then, it could have been prohibitively expensive to do an 83b election. The whole point of RSUs is that you don't owe anything until there is a liquidity event, unlike options which you may be required to exercise or lose while the company is still private.

However, RSUs only get this favorable treated (i.e. you've been given something of value, but can defer paying taxes on it) because they technically expire worthless if the company does not have a liquidity event in time. Thus far no successful tech company (that I know of) has screwed over its employees by casually choosing not to have a liquidity event and letting years worth of RSUs grants all expire worthless.

Stripe is trying to arrange liquidity for its employees who were granted RSUs in e.g. 2016, and that expire in 2023. Those employees have not had to pay taxes as the RSUs vested, but will have a large tax bill if those RSUs do anything other than expire worthless...

[zamnos]

> Thus far no successful tech company (that I know of) has screwed over its employees by casually choosing not to have a liquidity event

It depends on if you want to rank Foursquare as "successful", but they recently did that, and it was big news in the don't-let-RSUs-expire community.

https://www.theinformation.com/articles/the-private-tech-com...

[Blackthorn]

Holy shit. Can't believe that didn't make it to HN. You really should price startup equity compensation at zero. Even if the startup becomes successful.

[junar]

> However, restricted stock isn’t to be confused with RSUs (restricted stock units). RSUs don’t have the option to elect 83b.

https://www.kinetixfp.com/post/should-you-make-an-83b-electi...

[s1artibartfast]

Can they not just let the old RSU was expire and provide new grants with an equivalent number of shares?

That prevent the tax on exercising non liquid shares.

Similarly, why not just offer to buy the stock back at current valuation and leave it up to the employees to settled any taxes

[bzax]

They certainly can let the old RSUs expire worthless, but holding up the "social contract" (as opposed to the strict legal contract) with their employees (and former employees!) while also not drawing the ire of the IRS may be a challenge.

If you give new RSU grants, what time period do they vest over? What happens to current employees who leave before then, if they are required to re-earn-out their comp? What can you do at all about former employees? Will the IRS still accept that this deferred compensation is subject to "substantial risk of forfeiture" and thus the taxes on it can be deferred (see U.S. Code 409A)?

Stripe is trying to do option b), buy back stock at current valuation. To do so, they need to raise a couple billion dollars. That money will go to the employees (in exchange for some stock) so that the employees can settle up their taxes, though the IRS will "cut out the middleman" so to speak, and requires Stripe to simple withhold the proceeds and remit to the IRS on the employees' behalf.

The $3.5B tax bill is not "corporate tax" owed by Stripe, but employee income tax that will be owed by employees if there is a liquidity event, and which Stripe will be, in practice, required to withhold on their behalf if Stripe arrange that liquidity for them.

[jcdavis]

Issuing new grants almost certainly falls afoul of the law around tax-deferred equity that requires "Substantial risk of Forfeiture".

[moralestapia]

Great comment.

>Stripe was already worth $9B in 2016. If you joined then, it could have been prohibitively expensive to do an 83b election.

I don't think anyone that joined on 2016 or after got more than 0.0000001% of equity or whatever, so it wouldn't have been a massive bill. Also, that's the point of 38b anyway. Tax now or later, but tax.

[clintonb]

The definition of "massive" differs. Not everyone has $125K laying around to pay the IRS for illiquid RSUs.