The Oregon Stock Option Plan is a comprehensive program designed to provide eligible individuals with various types of stock options, namely Incentive Stock Options (SOS), Nonqualified Stock Options (SOS), and Exchange Options. This plan offers a range of options that cater to different employee needs and goals. Incentive Stock Options (SOS) are stock options granted to employees under specific criteria outlined by the Internal Revenue Code. These options offer certain tax advantages, as the gain from exercising SOS is generally taxed at a lower rate than that of SOS. To qualify for SOS, employees must meet specific requirements, including being an employee of the company granting the options and holding the shares for a certain period. Nonqualified Stock Options (SOS), on the other hand, are stock options that do not meet the requirements for SOS. SOS provide employees with the flexibility to purchase company shares at a predetermined price, known as the exercise price. These options are typically more widely available and can be granted to both employees and non-employee directors or consultants. Additionally, the Oregon Stock Option Plan may include Exchange Options, which allow employees to exchange their existing stock options for new ones, typically to align with changes in the company's capital structure or stock price. This option can be beneficial in situations such as mergers, acquisitions, or stock splits, where the original stock options may no longer meet the desired objectives. Overall, the Oregon Stock Option Plan encompasses a comprehensive framework that aims to incentivize and reward employees by providing them with various stock option types to suit their individual circumstances and financial goals. As such, it is a versatile plan that caters to employees' diverse needs within the state of Oregon.
Oregon Stock Option Plan Stock Option Plan which provides for grant of Incentive Stock Options, Nonqualified Stock Options, and Exchange Options
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Options that exceed the $200,000 threshold are ?non-qualified securities? and thus do not qualify for the Stock Option Deduction.
Non-qualified Stock Options (NSOs) are stock options that, when exercised, result in ordinary income under US tax laws on the difference, calculated on the exercise date, between the exercise price and the fair market value of the underlying shares.
Nonqualified: Employees generally don't owe tax when these options are granted. When exercising, tax is paid on the difference between the exercise price and the stock's market value. They may be transferable. Qualified or Incentive: For employees, these options may qualify for special tax treatment on gains.
A stock grant provides the recipient with value?the corporate stock. By contrast, stock options only offer employees the opportunity to purchase something of value. They can acquire the corporate stock at a set price, but the employees receiving stock options still have to pay for those stocks if they want them.
An incentive stock option (ISO) is a corporate benefit that gives an employee the right to buy shares of company stock at a discounted price with the added benefit of possible tax breaks on the profit. The profit on qualified ISOs is usually taxed at the capital gains rate, not the higher rate for ordinary income.
How are NSOs taxed when exercised? In short: You pay ordinary income tax rates on the difference between the strike price and the 409A valuation. Your employer already withholds a part, but it's the bare minimum (usually 25%)
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.
NSOs vs. RSUs NSOs give you the option to buy stock, but you might decide to never exercise them if the company's valuation falls below your strike price. In comparison, restricted stock units (RSUs) are actual shares that you acquire as they vest. You don't have to pay to exercise RSUs; you simply receive the shares.