This form is a Stock Option and Award Plan. The purpose of the plan is to secure for the stockholders the benefits of the incentive in stock ownership. The transactions are intended to comply with all applicable conditions of Rule 16b-3.
California Stock Option and Award Plan
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FAQ
In California, the limitation on incentive stock options (ISOs) is set at the first $100,000 of options that can become exercisable in any given calendar year. This means that any ISOs granted above this threshold subject the excess to regular income tax treatment upon exercise. Properly managing your options under the California Stock Option and Award Plan can help you maximize tax efficiency.
Profits made from exercising qualified stock options (QSO) are taxed at the capital gains tax rate (typically 15%), which is lower than the rate at which ordinary income is taxed. Gains from non-qualified stock options (NQSO) are considered ordinary income and are therefore not eligible for the tax break.
(b) For purposes of this section, California qualified stock option means a stock option that is issued and exercised pursuant to this section and that is designated by the corporation issuing the option as a California qualified stock option at the time the option is granted.
A qualified stock option is a type of company share option granted exclusively to employees. It confers an income tax benefit when exercised. Qualified stock options are also referred to as 'incentive stock options' or 'incentive share options.
Therefore, California will tax 70 percent of your total stock option income.
(b) For purposes of this section, California qualified stock option means a stock option that is issued and exercised pursuant to this section and that is designated by the corporation issuing the option as a California qualified stock option at the time the option is granted.
When you exercise NSOs, you pay California income tax on the spread between your strike price and the current 409A valuation (or fair market value). With RSUs, you're subject to California income tax when the shares are delivered to you.
An employee stock option is the right given to you by your employer to buy ("exercise") a certain number of shares of company stock at a pre-set price (the "grant," "strike" or "exercise" price) over a certain period of time (the "exercise period").
Non-qualified stock options (NSOs) are granted to employees, advisors, and consultants; incentive stock options (ISOs) are for employees only. With NSOs, you pay ordinary income taxes when you exercise the options, and capital gains taxes when you sell the shares.
Stock options are only valuable if the market value of the stock is higher than the grant price at some point in the vesting period. Otherwise, you're paying more for the shares than you could in theory sell them for. RSUs, meanwhile, are pure gain, as you don't have to pay for them.
