Stock Based Compensation Payroll Tax Exclusion

OVERVIEW
The City of San Francisco’s payroll expense tax covers all forms of compensation for services rendered in San Francisco, including but not limited to wages and salaries, bonuses, and stock compensation. A payroll expense tax exclusion for stock based compensation was approved on June 3, 2011 and allows companies to exclude stock based compensation above certain thresholds for tax years 2011 – 2017. The exclusion expires in 2017. All pre-IPO companies are eligible. Only stock compensation granted before an IPO is eligible.

CALCULATING EXCLUSION

• Paid more than $750,000 of Payroll Expense Tax on stock based compensation in 2010: Company may exclude payroll expense on stock based compensation for amount over what was paid in tax year 2010.
• Paid less than $750,000 of Payroll Expense Tax on stock based compensation in 2010: Company may exclude payroll expense on stock based compensation above $750,000 in tax.

REQUIREMENTS

• File a timely affidavit with Treasurer and Tax Collector
• Maintain records and documents File annual payroll expense tax return with Treasurer and Tax Collector, regardless of amount owed, after claiming this exclusion

ADDITIONAL INFORMATION
Stock-based Compensation Exclusion Code Language can be found by clicking here.