FICA/FUTA TREATMENT OF STATUTORY STOCK OPTIONS.

• Position: Federal Insurance Contribution Act, Federal Unemployment Tax Act - Brief Article

Recent IRS Notice 2001-14, http://ftp.fedworld.gov/pub/irs-drop/n-01-14.pdf, addresses the FICA/FUTA treatment applicable to statutory stock options--ISOs and employee stock purchase plans (ESPPs).

The IRS explains that the income tax exclusion upon the exercise of statutory stock options does not apply to FICA/FUTA, even though prior administrative guidance, Rev. Rul. 71-52, indicated to the contrary. That ruling is now obsolete in light of 1983 legislation.

Due to the absence of clear administrative guidance, IRS agrees in Notice 2001-14 to not assess FICA/FUTA upon the exercise...