Statutory Stock Options
Statutory Stock Option Defined The term “statutory stock option” describes stock option arrangements with particular Federal tax benefits made available under IRC § 421. Such arrangements include the transfer of a share of stock to an individual pursuant to his exercise of an incentive stock option in respect of which the requirements of IRC § 422(a) are met. It also includes transfers pursuant to the exercise of an option under an employee stock purchase plan in respect of which the requirements of IRC § 423(a) are met.
PA PIT Treatment Compensation in the form of statutory stock options is taxable as personal income when: The option is exercised if the stock subject to the option is free from any restrictions having a significant effect on its market value; The restrictions lapse if the stock subject to the option is subject to restrictions having a significant effect on its market value; or Exchanged, sold or otherwise converted into cash or other property. IRC §§ 421, 421, 422, 423, and 424 have no application for PIT purposes.