Groups Express Concern Over Pending Regs on Discounted Option Plans
Groups Express Concern Over Pending Regs on Discounted Option Plans
- AuthorsMoser, StanAquilante, Joseph
- Institutional AuthorsDeaconess Billings ClinicPassaic Beth Israel
- Code Sections
- Subject Area/Tax Topics
- Index Termsyear of inclusion, pension plan distributions, state and localproperty transferred for services
- Jurisdictions
- LanguageEnglish
- Tax Analysts Document NumberDoc 2001-31142 (2 original pages)
- Tax Analysts Electronic Citation2001 TNT 245-17
=============== SUMMARY ===============
In two substantially similar letters, Stan Moser of the Deaconess Billings Clinic, Billings, Mont., and Joseph Aquilante of Passaic Beth Israel, Passaic, N.J., have expressed concern over pending regulations that might be issued under section 457 for discounted option plans under section 83 for employees of exempt organizations.
Any attempt to limit the ability of not-for-profit organizations to use discounted options would exceed the regulatory authority granted under section 457 that exempts section 83 options, Moser and Aquilante say. Issuing any regulations adverse to discounted option plans would limit the ability of not-for-profit organizations to attract, retain, and reward valuable employees, they add. Also, Moser and Aquilante state that the employees of not-for-profit organizations have come to rely on the current regulations, and any abrupt change to those regs would be unfair.
=============== FULL TEXT ===============
December 10, 2001
Mr. William F. Sweetnam
United States Department of Treasury
1500 Pennsylvania Avenue, NW
Washington, DC 20222-0001
Mr. Sweetnam:
[1] The purpose of this letter is to express our deep concern regarding the possibility that pending regulations might soon be issued under Internal Revenue Code ("Code") Section 457, dealing with discounted option plans under Code Section 83 for employees of exempt organizations, that are significantly adverse to such plans.
[2] We respectfully ask for your direct involvement in this matter. The issuance of any regulations in this area without the involvement of sponsoring entities and the professionals that implement them would be prematre and wrong, given the popularity of these programs and the benefit they provide to the employees of not for profit organizations. We seek the withdrawal from the pending regulations any provisions addressing discount options, pending further consideration of this issue. The principal reasons for this request are summarized as follows:
o Any attempt to limit the ability of not for profit
organizations to utilize discounted options oversteps the
regulatory authority under Code Section 457(f), since that
Code Section specifically exempts Code Section 83 transfers
including options. Moreover, the regulations under Code
Section 83 properly state the treatment of the transfer of
options, including those issued to the employees of not for
profit organizations.
o In today's challenging economic environment most not for
profit organizations are struggling. Non profits have
been called upon repeatedly to help our nation throughout our
history, especially now during our most recent and ongoing
national challenges. By issuing regulations adverse to viable
discounted option plans, the Treasury would be taking upon
itself to limit our ability to attract, retain and reward
valuable employees necessary for us to provide service to the
citizens of this country. Not for profits compete everyday
against for-profit organizations for highly trained and
skilled employees. If not for profits are denied the ability
to offer comparable pay for their skilled employees, then the
communities they serve shall suffer. We think it is
important, if not imperative, that the Treasury consider the
economic and psychic cost to this nation if our exempt
organizations falter due to our inability to attract and
retain qualified employees, before issuing regulations,
especially those that might contravene the statutes they
regulate. Efforts to thwart the efforts of our nonprofit
organizations to adequately compensate its employees for their
hard and important work -- especially by an exceeding
regulatory authority -- seems ill-timed and inappropriate. It
sends the wrong message at the wrong time.
o We have undertaken great amounts of time and expense to
implement these programs, and to communicate them to our
employees. We have done so because we recognize the importance
of our employees. We have done so in good faith in reliance of
the plain language of the Code and the underlying regulations.
The employees now look to their options as an important part
of their compensation. To abruptly change well-established
rules, without the input of affected organizations is
premature, inequitable and unfair.
[3] Mr. Sweetnam, we know your reputation as a fair and reasonable man, which is why we call for your immediate and direct action to remove provisions that would adversely affect discount option plans from the pending regulations. We trust that you agree that the Treasury should be interpreting and clarifying the tax laws, but not creating new law. Thus, we look forward to working with you soon to reach a mutually favorable resolution of this matter. To this end, we would not consider satisfactory a result whereby existing plans are grandfathered without the ability to grant new options to current and future employees. The inequity of having similarly situated employees with materially different compensation arrangements is obvious.
[4] President Bush has repeatedly noted the important role of the nonprofit community as a part of this nation. And this matter is of great importance to us. The importance of the discounted option programs will necessarily compel us to take whatever actions are available to preserve them in a viable manner -- including to request the intervention of both the Bush administration and Congress. We hope, however, that we can reach a satisfactory resolution at the regulatory level.
[5] We thank you for your consideration of this letter and the requests made herein. We look forward to arranging a meeting to discuss this matter with you.
Sincerely,
Stan Moser
Vice President, Chief Financial
Officer
Deaconess Billings Clinic
Billings, Montana
- AuthorsMoser, StanAquilante, Joseph
- Institutional AuthorsDeaconess Billings ClinicPassaic Beth Israel
- Code Sections
- Subject Area/Tax Topics
- Index Termsyear of inclusion, pension plan distributions, state and localproperty transferred for services
- Jurisdictions
- LanguageEnglish
- Tax Analysts Document NumberDoc 2001-31142 (2 original pages)
- Tax Analysts Electronic Citation2001 TNT 245-17
