Massachusetts adopts the federal tax treatment
of incentive stock options as provided in the
Internal Revenue Code (the "Code") as
amended on January 1, 2005. Under the
federal rules, and therefore for Massachusetts
purposes as well, no tax consequences result
when employees are granted or exercise
options to purchase company stock.
Employees are taxed only when they sell the
stock acquired through the exercise. This
results in a deferral of tax for both federal and
Massachusetts tax purposes which constitutes
a tax expenditure.
Origin: M.G.L. c. 62 § 1(c) and (d); G.L. c. 62, § 2(a); Code
§§ 421, 422, and 424
Tax Type
Tax Expenditure
Item Number
Item Name
Description
Origin
FY2020
FY2021
FY2022
FY2023
FY2024
Personal Income Tax
Deferrals of Gross Income
1.102
Treatment of Incentive Stock Options
Massachusetts adopts the federal tax treatment<BR>of incentive stock options as provided in the<BR>Internal Revenue Code (the "Code") as<BR>amended on January 1, 2005. Under the<BR>federal rules, and therefore for Massachusetts<BR>purposes as well, no tax consequences result<BR>when employees are granted or exercise<BR>options to purchase company stock.<BR>Employees are taxed only when they sell the<BR>stock acquired through the exercise. This<BR>results in a deferral of tax for both federal and<BR>Massachusetts tax purposes which constitutes<BR>a tax expenditure.
M.G.L. <a href="https://malegislature.gov/Laws/GeneralLaws/PartI/TitleIX/Chapter62/Section1" target="_blank">c. 62 § 1(c) and (d)</a>; G.L. <a href="https://malegislature.gov/Laws/GeneralLaws/PartI/TitleIX/Chapter62/Section2" target="_blank">c. 62, § 2(a)</a>; Code<BR>§§ <a href="https://www.law.cornell.edu/uscode/text/26/421" target="_blank">421</a>, <a href="https://www.law.cornell.edu/uscode/text/26/422" target="_blank">422</a>, and <a href="https://www.law.cornell.edu/uscode/text/26/424" target="_blank">424</a>
4.3
4.1
4.3
4.4
4.6
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