Notes on 26 U.S.C. § 422 : US Code - Notes

Search Notes on 26 U.S.C. § 422 : US Code - Notes

(Added Pub. L. 97-34, title II, Sec. 251(a), Aug. 13, 1981, 95
Stat. 256, Sec. 422A; amended Pub. L. 97-448, title I, Sec.
102(j)(1)-(4), Jan. 12, 1983, 96 Stat. 2373; Pub. L. 98-369, div.
A, title V, Sec. 555(a)(1), div. B, title VI, Sec. 2662(f)(1), July
18, 1984, 98 Stat. 897, 1159; Pub. L. 99-514, title III, Sec.
321(a), (b), title XVIII, Sec. 1847(b)(5), Oct. 22, 1986, 100 Stat.
2220, 2856; Pub. L. 100-647, title I, Sec. 1003(d)(1)(A), (2), Nov.
10, 1988, 102 Stat. 3384; renumbered Sec. 422 and amended Pub. L.
101-508, title XI, Sec. 11801(c)(9)(A)(i), (C), Nov. 5, 1990, 104
Stat. 1388-524, 1388-525.)
PRIOR PROVISIONS
A prior section 422, added Pub. L. 88-272, title II, Sec. 221(a),
Feb. 26, 1964, 78 Stat. 64; amended Pub. L. 94-455, title VI, Sec.
603(a), (b), title XIX, Sec. 1906(b)(13)(A), Oct. 4, 1976, 90 Stat.
1574, 1834; Pub. L. 96-589, Sec. 6(i)(3), Dec. 24, 1980, 94 Stat.
3410, related to qualified stock options, prior to repeal by Pub.
L. 101-508, title XI, Sec. 11801(a)(20), Nov. 5, 1990, 104 Stat.
1388-521. For savings provision, see section 11821(b) of Pub. L.
101-508, set out as a note under section 45K of this title.
AMENDMENTS
1990 - Pub. L. 101-508, Sec. 11801(c)(9)(A)(i), renumbered
section 422A of this title as this section.
Subsec. (a)(2). Pub. L. 101-508, Sec. 11801(c)(9)(C)(i),
substituted "424(a)" for "425(a)".
Subsec. (c)(5) to (8). Pub. L. 101-508, Sec. 11801(c)(9)(C)(ii),
redesignated pars. (6) to (8) as (5) to (7), respectively, and
struck out former par. (5) "Coordination with sections 422 and 424"
which read as follows: "Sections 422 and 424 shall not apply to an
incentive stock option."
1988 - Subsec. (b). Pub. L. 100-647, Sec. 1003(d)(1)(A), inserted
at end "Such term shall not include any option if (as of the time
the option is granted) the terms of such option provide that it
will not be treated as an incentive stock option."
Subsec. (b)(7). Pub. L. 100-647, Sec. 1003(d)(2)(B), struck out
par. (7) which read as follows: "under the terms of the plan, the
aggregate fair market value (determined at the time the option is
granted) of the stock with respect to which incentive stock options
are exercisable for the 1st time by such individual during any
calendar year (under all such plans of the individual's employer
corporation and its parent and subsidiary corporations) shall not
exceed $100,000."
Subsec. (c)(1). Pub. L. 100-647, Sec. 1003(d)(2)(C), substituted
"subsection (d)" for "paragraph (7) of subsection (b)".
Subsec. (d). Pub. L. 100-647, Sec. 1003(d)(2)(A), added subsec.
(d).
1986 - Subsec. (b)(7). Pub. L. 99-514, Sec. 321(a), added par.
(7) and struck out former par. (7) which read as follows: "such
option by its terms is not exercisable while there is outstanding
(within the meaning of subsection (c)(7)) any incentive stock
option which was granted, before the granting of such option, to
such individual to purchase stock in his employer corporation or in
a corporation which (at the time of the granting of such option) is
a parent or subsidiary corporation of the employer corporation, or
in a predecessor corporation of any of such corporations; and".
Subsec. (b)(8). Pub. L. 99-514, Sec. 321(a), struck out par. (8)
which read as follows: "in the case of an option granted after
December 31, 1980, under the terms of the plan the aggregate fair
market value (determined as of the time the option is granted) of
the stock for which any employee may be granted incentive stock
options in any calendar year (under all such plans of his employer
corporation and its parent and subsidiary corporation) shall not
exceed $100,000 plus any unused limit carryover to such year."
Subsec. (c)(1). Pub. L. 99-514, Sec. 321(b)(2), substituted
"paragraph (7) of subsection (b)" for "paragraph (8) of subsection
(b) and paragraph (4) of this subsection".
Subsec. (c)(4). Pub. L. 99-514, Sec. 321(b)(1), redesignated par.
(5) as (4) and struck out former par. (4) relating to carryover of
unused limit.
Subsec. (c)(5), (6). Pub. L. 99-514, Sec. 321(b)(1)(B),
redesignated pars. (6) and (8) as (5) and (6), respectively. Former
par. (5) redesignated (4).
Subsec. (c)(7). Pub. L. 99-514, Sec. 321(b)(1), redesignated par.
(9) as (7) and struck out former par. (7) which provided that for
purposes of subsec. (b)(7) any incentive stock option be treated as
outstanding until such option was exercised in full or expired by
reason of lapse of time.
Subsec. (c)(8). Pub. L. 99-514, Sec. 321(b)(1)(B), redesignated
par. (10) as (8). Former par. (8) redesignated (6).
Subsec. (c)(9). Pub. L. 99-514, Sec. 321(b)(1)(B), redesignated
par. (9) as (7).
Pub. L. 99-514, Sec. 1847(b)(5), substituted "section 22(e)(3)"
for "section 37(e)(3)".
Subsec. (c)(10). Pub. L. 99-514, Sec. 321(b)(1)(B), redesignated
par. (10) as (8).
1984 - Subsec. (c)(9). Pub. L. 98-369, Sec. 2662(f)(1),
substituted "section 37(e)(3)" for "section 105(d)(4)".
Subsec. (c)(10). Pub. L. 98-369, Sec. 555(a)(1), added par. (10).
1983 - Subsec. (b)(8). Pub. L. 97-448, Sec. 102(j)(1),
substituted "granted incentive stock options" for "granted
options".
Subsec. (c)(1). Pub. L. 97-448, Sec. 102(j)(2), substituted "Good
faith efforts to value stock" for "Exercise of option when price is
less than value of stock" as par. (1) heading and inserted sentence
providing that, to the extent provided in regulations by the
Secretary, a rule similar to that already enunciated in the
paragraph applies for purposes of par. (8) of subsec. (b) and par.
(4) of subsec. (c).
Subsec. (c)(2)(A). Pub. L. 97-448, Sec. 102(j)(3), substituted
"either of the periods" for "the 2-year period".
Subsec. (c)(4)(A)(ii). Pub. L. 97-448, Sec. 102(j)(4),
substituted "granted incentive stock options" for "granted
options".
EFFECTIVE DATE OF 1988 AMENDMENT
Amendment by Pub. L. 100-647 effective, except as otherwise
provided, as if included in the provision of the Tax Reform Act of
1986, Pub. L. 99-514, to which such amendment relates, see section
1019(a) of Pub. L. 100-647, set out as a note under section 1 of
this title.
EFFECTIVE DATE OF 1986 AMENDMENT
Section 321(c) of Pub. L. 99-514 provided that: "The amendments
made by this section [amending this section] shall apply to options
granted after December 31, 1986."
Amendment by section 1847(b)(5) of Pub. L. 99-514 effective,
except as otherwise provided, as if included in the provisions of
the Tax Reform Act of 1984, Pub. L. 98-369, div. A, to which such
amendment relates, see section 1881 of Pub. L. 99-514, set out as a
note under section 48 of this title.
EFFECTIVE DATE OF 1984 AMENDMENT
Section 555(c)(1) of Pub. L. 98-369, as amended by Pub. L. 99-
514, title XVIII, Sec. 1855(a)(1), Oct. 22, 1986, 100 Stat. 2882,
provided that: "The amendment made by subsection (a)(1) [amending
this section] shall apply to options granted after March 20, 1984,
except that such subsection shall not apply to any incentive stock
option granted before September 20, 1984, pursuant to a plan
adopted or corporate action taken by the board of directors of the
grantor corporation before May 15, 1984."
Amendment by section 2662 of Pub. L. 98-369 effective as though
included in the enactment of the Social Security Amendments of
1983, Pub. L. 98-21, see section 2664(a) of Pub. L. 98-369, set out
as a note under section 401 of Title 42, The Public Health and
Welfare.
EFFECTIVE DATE OF 1983 AMENDMENT
Amendment by Pub. L. 97-448 effective, except as otherwise
provided, as if it had been included in the provision of the
Economic Recovery Tax Act of 1981, Pub. L. 97-34, to which such
amendment relates, see section 109 of Pub. L. 97-448, set out as a
note under section 1 of this title.
EFFECTIVE DATE
Section 251(c) of Pub. L. 97-34, as amended by Pub. L. 99-514,
Sec. 2, Oct. 22, 1986, 100 Stat. 2095, provided that:
"(1) Options to which section applies. -
"(A) In general. - Except as provided in subparagraph (B), the
amendments made by this section [enacting this section and
amending sections 421, 425 [now 424], and 6039 of this title]
shall apply with respect to options granted on or after January
1, 1976, and exercised on or after January 1, 1981, or
outstanding on such date.
"(B) Election and designation of options. - In the case of an
option granted before January 1, 1981, the amendments made by
this section shall apply only if the corporation granting such
option elects (in the manner and at the time prescribed by the
Secretary of the Treasury or his delegate) to have the amendments
made by this section apply to such option. The aggregate fair
market value (determined at the time the option is granted) of
the stock for which any employee was granted options (under all
plans of his employer corporation and its parent and subsidiary
corporations) to which the amendments made by this section apply
by reason of this subparagraph shall not exceed $50,000 per
calendar year ans shall not exceed $200,000 in the aggregate.
"(2) Changes in terms of options. - In the case of an option
granted on or after January 1, 1976, and outstanding on the date of
the enactment of this Act [Aug. 13, 1981], paragraph (1) of section
425(h) of the Internal Revenue Code of 1986 [formerly I.R.C. 1954]
shall not apply to any change in the terms of such option (or the
terms of the plan under which granted, including shareholder
approval) made within 1 year after such date of enactment to permit
such option to qualify as a incentive stock option."
SAVINGS PROVISION
For provisions that nothing in amendment by Pub. L. 101-508 be
construed to affect treatment of certain transactions occurring,
property acquired, or items of income, loss, deduction, or credit
taken into account prior to Nov. 5, 1990, for purposes of
determining liability for tax for periods ending after Nov. 5,
1990, see section 11821(b) of Pub. L. 101-508, set out as a note
under section 45K of this title.
TREATMENT OF OPTIONS AS INCENTIVE STOCK OPTIONS
Section 1003(d)(1)(B) of Pub. L. 100-647 provided that: "In the
case of an option granted after December 31, 1986, and on or before
the date of the enactment of this Act [Nov. 10, 1988], such option
shall not be treated as an incentive stock option if the terms of
such option are amended before the date 90 days after such date of
enactment to provide that such option will not be treated as an
incentive stock option."
PLAN AMENDMENTS NOT REQUIRED UNTIL JANUARY 1, 1989
For provisions directing that if any amendments made by subtitle
A or subtitle C of title XI [Secs. 1101-1147 and 1171-1177] or
title XVIII [Secs. 1800-1899A] of Pub. L. 99-514 require an
amendment to any plan, such plan amendment shall not be required to
be made before the first plan year beginning on or after Jan. 1,
1989, see section 1140 of Pub. L. 99-514, as amended, set out as a
note under section 401 of this title.