IRS modernizes tax filings for startups following Carta’s coalition petition

Author:

The Carta Team

|
Read time:

2 minutes

Published date:

24 October 2023

Following a years-long coalition petition by Carta, the IRS changed 83(b) election procedures to permanently allow submission with e-signatures.

This month, the IRS announced it would change 83(b) election procedures to permanently allow submission with e-signatures. This change will help founders and employees take advantage of a critical tax incentive intended to support employee ownership.

Amid the challenges of the COVID-19 pandemic, the IRS temporarily allowed taxpayers to electronically sign specific documents, including 83(b) elections, which enable founders and employee-owners to accelerate a portion of their tax liability on equity ownership to the date they acquired their shares. This e-signature allowance was set to expire on October 31, 2023.

On October 6, Carta and 32 signatories* sent a letter to the IRS urging them to make e-signatures for the 83(b) elections permanent. This week, the IRS officially formalized 83(b) e-signature allowance in its Internal Revenue Manual.

“This election is crucial for founders and employee-owners, as it enables them to accelerate the taxation of equity ownership to the date they are granted the shares, which can result in significant tax savings,” said Amy Miller, public policy director at Carta. “The decision marks an important milestone in modernizing IRS procedures.”

The coalition commends the IRS’s decision to extend this solution to founders and employee owners.

Read the full coalition comment letter to the IRS here

*Signatories include:

• 500 Global
• Capital Factory
• Carta, Inc.
• Cooley LLP
• Croke Fairchild Duarte & Beres LLC
• Davis Polk & Wardwell LLP
• Engine
• Fenwick & West LLP
• gener8tor
• Goodwin Procter LLP
• Gunderson Dettmer Stough Villeneuve Franklin & Hachigian LLP
• Johnson & Oshan Law PLLC
• Koenig, Oelsner, Taylor, Schoenfeld & Gaddis PC
• Latham & Watkins LLP
• Lowenstein Sandler LLP
• Mayer Brown LLP
• McDermott Will & Emery LLP
• Mintz, Levin, Cohn, Ferris, Glovsky & Popeo PC
• Morrison & Foerster LLP
• National Venture Capital Association
• Optimal Counsel LLP
• Orrick Herrington & Sutcliffe LLP
• Perkins Coie LLP
• Plug and Play
• Sidley Austin LLP
• Silicon Legal Strategy PC
• Simpson Thacher & Bartlett LLP
• Stripe, Inc.
• Tribe Capital Management LLC
• Union Square Ventures
• Vela Wood PC
• Wilmer Cutler Pickering Hale & Dorr LLP
• Y Combinator Management LLC

DISCLOSURE: This publication contains general information only and eShares, Inc. dba Carta, Inc. (“Carta”) is not, by means of this publication, rendering accounting, business, financial, investment, legal, tax, or other professional advice or services. This publication is not a substitute for such professional advice or services nor should it be used as a basis for any decision or action that may affect your business or interests. Before making any decision or taking any action that may affect your business or interests, you should consult a qualified professional advisor. This communication is not intended as a recommendation, offer or solicitation for the purchase or sale of any security. Carta does not assume any liability for reliance on the information provided herein.