IRS Issues Final Regulations on Employee Stock Purchase Plans

November 30, 2009

On November 16, 2009, the IRS issued final regulations governing employee stock purchase plans governed by section 423 of the Internal Revenue Code. Section 423 provides favorable tax treatment for stock acquired through an option granted under an employee stock purchase plan that meets the requirements of section 423. The final regulations largely adopt the regulations as proposed by the IRS on July 28, 2008, with some notable changes and clarifications. The Alert Memo briefly summarizes the key changes and clarifications of the final regulations which apply to any option under an employee stock purchase plan granted on or after January 1, 2010.