Home > Data > Subtitle D > Chapter 45 > Sec. 4985
Sec. 4985. Stock Compensation Of Insiders In Expatriated Corporations
Last Updated: January 8, 2012
(a) Imposition of tax
In the case of an individual who is a disqualified individual
with respect to any expatriated corporation, there is hereby
imposed on such person a tax equal to -
(1) the rate of tax specified in section 1(h)(1)(C), multiplied
by
(2) the value (determined under subsection (b)) of the
specified stock compensation held (directly or indirectly) by or
for the benefit of such individual or a member of such
individual's family (as defined in section 267) at any time
during the 12-month period beginning on the date which is 6
months before the expatriation date.
(b) Value
For purposes of subsection (a) -
(1) In general
The value of specified stock compensation shall be -
(A) in the case of a stock option (or other similar right) or
a stock appreciation right, the fair value of such option or
right, and
(B) in any other case, the fair market value of such
compensation.
(2) Date for determining value
The determination of value shall be made -
(A) in the case of specified stock compensation held on the
expatriation date, on such date,
(B) in the case of such compensation which is canceled during
the 6 months before the expatriation date, on the day before
such cancellation, and
(C) in the case of such compensation which is granted after
the expatriation date, on the date such compensation is
granted.
(c) Tax to apply only if shareholder gain recognized
Subsection (a) shall apply to any disqualified individual with
respect to an expatriated corporation only if gain (if any) on any
stock in such corporation is recognized in whole or part by any
shareholder by reason of the acquisition referred to in section
7874(a)(2)(B)(i) with respect to such corporation.
(d) Exception where gain recognized on compensation
Subsection (a) shall not apply to -
(1) any stock option which is exercised on the expatriation
date or during the 6-month period before such date and to the
stock acquired in such exercise, if income is recognized under
section 83 on or before the expatriation date with respect to the
stock acquired pursuant to such exercise, and
(2) any other specified stock compensation which is exercised,
sold, exchanged, distributed, cashed-out, or otherwise paid
during such period in a transaction in which income, gain, or
loss is recognized in full.
(e) Definitions
For purposes of this section -
(1) Disqualified individual
The term "disqualified individual" means, with respect to a
corporation, any individual who, at any time during the 12-month
period beginning on the date which is 6 months before the
expatriation date -
(A) is subject to the requirements of section 16(a) of the
Securities Exchange Act of 1934 with respect to such
corporation or any member of the expanded affiliated group
which includes such corporation, or
(B) would be subject to such requirements if such corporation
or member were an issuer of equity securities referred to in
such section.
(2) Expatriated corporation; expatriation date
(A) Expatriated corporation
The term "expatriated corporation" means any corporation
which is an expatriated entity (as defined in section
7874(a)(2)). Such term includes any predecessor or successor of
such a corporation.
(B) Expatriation date
The term "expatriation date" means, with respect to a
corporation, the date on which the corporation first becomes an
expatriated corporation.
(3) Specified stock compensation
(A) In general
The term "specified stock compensation" means payment (or
right to payment) granted by the expatriated corporation (or by
any member of the expanded affiliated group which includes such
corporation) to any person in connection with the performance
of services by a disqualified individual for such corporation
or member if the value of such payment or right is based on (or
determined by reference to) the value (or change in value) of
stock in such corporation (or any such member).
(B) Exceptions
Such term shall not include -
(i) any option to which part II of subchapter D of chapter
1 applies, or
(ii) any payment or right to payment from a plan referred
to in section 280G(b)(6).
(4) Expanded affiliated group
The term "expanded affiliated group" means an affiliated group
(as defined in section 1504(a) without regard to section
1504(b)(3)); except that section 1504(a) shall be applied by
substituting "more than 50 percent" for "at least 80 percent"
each place it appears.
(f) Special rules
For purposes of this section -
(1) Cancellation of restriction
The cancellation of a restriction which by its terms will never
lapse shall be treated as a grant.
(2) Payment or reimbursement of tax by corporation treated as
specified stock compensation
Any payment of the tax imposed by this section directly or
indirectly by the expatriated corporation or by any member of the
expanded affiliated group which includes such corporation -
(A) shall be treated as specified stock compensation, and
(B) shall not be allowed as a deduction under any provision
of chapter 1.
(3) Certain restrictions ignored
Whether there is specified stock compensation, and the value
thereof, shall be determined without regard to any restriction
other than a restriction which by its terms will never lapse.
(4) Property transfers
Any transfer of property shall be treated as a payment and any
right to a transfer of property shall be treated as a right to a
payment.
(5) Other administrative provisions
For purposes of subtitle F, any tax imposed by this section
shall be treated as a tax imposed by subtitle A.
(g) Regulations
The Secretary shall prescribe such regulations as may be
necessary or appropriate to carry out the purposes of this section.
-SOURCE
(Added Pub. L. 108-357, title VIII, Sec. 802(a), Oct. 22, 2004, 118
Stat. 1566.)
-MISC1
PRIOR PROVISIONS
Prior sections 4986 to 4998 were repealed by Pub. L. 100-418,
title I, Sec. 1941(a), (c), Aug. 23, 1988, 102 Stat. 1322, 1324,
applicable to crude oil removed from the premises on or after Aug.
23, 1988.
Section 4986, added Pub. L. 96-223, title I, Sec. 101(a)(1), Apr.
2, 1980, 94 Stat. 230, related to imposition of windfall profit tax
on domestic crude oil.
Section 4987, added Pub. L. 96-223, title I, Sec. 101(a)(1), Apr.
2, 1980, 94 Stat. 230; amended Pub. L. 97-34, title VI, Sec.
602(a), Aug. 13, 1981, 95 Stat. 337; Pub. L. 98-369, div. A, title
I, Sec. 25(a), July 18, 1984, 98 Stat. 506, related to amount of
windfall profit tax on domestic crude oil.
Section 4988, added Pub. L. 96-223, title I, Sec. 101(a)(1), Apr.
2, 1980, 94 Stat. 231; amended Pub. L. 97-448, title II, Sec.
201(a), (h)(1)(D), Jan. 12, 1983, 96 Stat. 2391, 2394; Pub. L. 99-
514, title XIII, Sec. 1301(j)(4), Oct. 22, 1986, 100 Stat. 2657,
related to windfall profit and removal price.
Section 4989, added Pub. L. 96-223, title I, Sec. 101(a)(1), Apr.
2, 1980, 94 Stat. 233; amended Pub. L. 97-448, title II, Sec.
201(b), Jan. 12, 1983, 96 Stat. 2392, related to adjusted base
price for purposes of windfall profit tax on domestic crude oil.
Section 4990, added Pub. L. 96-223, title I, Sec. 101(a)(1), Apr.
2, 1980, 94 Stat. 234, related to phaseout of windfall profit tax
on domestic crude oil.
Section 4991, added Pub. L. 96-223, title I, Sec. 101(a)(1), Apr.
2, 1980, 94 Stat. 235; amended Pub. L. 97-34, title VI, Secs.
601(b)(1), 603(a), Aug. 13, 1981, 95 Stat. 336, 338; Pub. L. 97-
448, title II, Sec. 201(c), Jan. 12, 1983, 96 Stat. 2392; Pub. L.
99-514, title XVIII, Sec. 1879(h)(1), Oct. 22, 1986, 100 Stat.
2907, related to taxable crude oil and categories of oil.
Section 4992, added Pub. L. 96-223, title I, Sec. 101(a)(1), Apr.
2, 1980, 94 Stat. 236; amended Pub. L. 97-34, title VI, Sec.
603(c), Aug. 13, 1981, 95 Stat. 338; Pub. L. 97-354, Sec. 3(b)(2),
Oct. 19, 1982, 96 Stat. 1688; Pub. L. 97-448, title II, Sec.
201(d), Jan. 12, 1983, 96 Stat. 2392, related to independent
producer oil.
Section 4993, added Pub. L. 96-223, title I, Sec. 101(a)(1), Apr.
2, 1980, 94 Stat. 239; amended Pub. L. 97-448, title II, Sec.
201(e), Jan. 12, 1983, 96 Stat. 2392, related to incremental
tertiary oil.
Section 4994, added Pub. L. 96-223, title I, Sec. 101(a)(1), Apr.
2, 1980, 94 Stat. 241; amended Pub. L. 97-34, title VI, Secs.
601(b)(2), 603(b), 604(a)-(c), Aug. 13, 1981, 95 Stat. 337-339;
Pub. L. 97-248, title II, Sec. 291, Sept. 3, 1982, 96 Stat. 572;
Pub. L. 97-448, title I, Sec. 106(a)(2), (4)(B), (b), title II,
Sec. 201(f), Jan. 12, 1983, 96 Stat. 2388, 2390, 2392, related to
definitions and special rules with respect to exempt oil.
Section 4995, added Pub. L. 96-223, title I, Sec. 101(a)(1), Apr.
2, 1980, 94 Stat. 244; amended Pub. L. 97-34, title VI, Sec.
601(b)(3), Aug. 13, 1981, 95 Stat. 337; Pub. L. 97-448, title II,
Sec. 201(g), Jan. 12, 1983, 96 Stat. 2393, related to withholding
and depository requirements bearing on the windfall profit tax.
Section 4996, added Pub. L. 96-223, title I, Sec. 101(a)(1), Apr.
2, 1980, 94 Stat. 247; amended Pub. L. 97-248, title II, Sec.
284(a), Sept. 3, 1982, 96 Stat. 569; Pub. L. 97-354, Sec. 3(b)(1),
Oct. 19, 1982, 96 Stat. 1688; Pub. L. 97-448, title II, Sec.
201(h)(1)(A)-(C), (2), Jan. 12, 1983, 96 Stat. 2393-2395, provided
for other definitions and special rules bearing on the windfall
profit tax.
Section 4997, added Pub. L. 96-223, title I, Sec. 101(a)(1), Apr.
2, 1980, 94 Stat. 249; amended Pub. L. 97-448, title II, Sec.
201(i)(1), Jan. 12, 1983, 96 Stat. 2395, related to records and
information, and regulations, bearing on the windfall profit.
Section 4998, added Pub. L. 96-223, title I, Sec. 101(a)(1), Apr.
2, 1980, 94 Stat. 250, related to cross references.
EFFECTIVE DATE
Pub. L. 108-357, title VIII, Sec. 802(d), Oct. 22, 2004, 118
Stat. 1568, provided that: "The amendments made by this section
[enacting this chapter and amending sections 162, 275, and 3121 of
this title] shall take effect on March 4, 2003; except that periods
before such date shall not be taken into account in applying the
periods in subsections (a) and (e)(1) of section 4985 of the
Internal Revenue Code of 1986, as added by this section."
-REFTEXT
REFERENCES IN TEXT
Section 16(a) of the Securities Exchange Act of 1934, referred to
in subsec. (e)(1)(A), is classified to section 78p(a) of Title 15,
Commerce and Trade.