Subject: ISO AMT Comment: Submitted By Todd Keen March 18, 2005 todd_keen@comcast.net I was contacted yesterday via email by an organization I have been associated with for the last several years known as ReformAMT (www.reformat.org). I joined this organization sometime after being hit with a substantial tax bill in the form of AMT tax in the tax year 2000. They have informed me of your panel and you’re looking for input on the following items regarding current tax laws: - Headaches, unnecessary complexity, and burdens that taxpayers - both Individual’s and businesses - face because of the existing system. - Aspects of the tax system that are unfair. - Specific examples of how the tax code distorts important business or personal decisions. - Goals that the Panel should try to achieve as it evaluates the existing tax system and recommends options for reform. In regards to the following item: - Headaches, unnecessary complexity, and burdens that taxpayers - both individuals and businesses - face because of the existing system. I have worked most of my adult life at start up high technical companies which commonly issued stock options as a form of compensation. One grant I received in 1997 was for ISO options, the rest were for Non-Qualified options. It is the ISO options that have created my headache. With the ISO options the general prevailing philosophy on the sales of these options was to exercise them and hold them for at least a year so that they would be taxed as long term capitol gains. This philosophy appears to have been a recipe for over taxation in the form of AMT tax when held in the context of the boom period of 1999 – 2001. While my employer held seminars on the implications that stock options had on potential tax burdens, we would be advised to consult with our own private tax consultant on our specific details. The problem is many tax consultants seemed to be inadequately informed on the matter of stock sales, ISO options and AMT tax implications. The result of attempting to do the correct thing for me to put myself in a tax situation where my ISO options would be taxable as long term gains resulted in being taxed on potential income that I have never made. Indeed four years later the stock my ISO’s were granted in have still not approached the values that my AMT tax was based upon. I have since sold these shares to pay for my AMT obligation, but I am extremely disappointed at the opportunity lost. I am not an accountant and to this day still do not know what would have been the correct way to handle my ISO options. I have continued to seek accounting help in this area several years after the fact, I have involved myself in the organization ReformAMT and hope that some day a clearer more representative taxation on my ISO sales will be implemented and I will have some restitution on my AMT taxes paid. I am not a millionaire. I do not earn $200,000.00 every year. I had several exceptional earnings years based upon stock options in the late 90’s and early 2000. I am not now nor have I ever been close to bankruptcy. I have paid all my tax bills. I do believe that due to the current tax laws and lack of correct advice I have been overtaxed in the form of AMT tax on ISO options for profits I will never earn. I also feel that the government has impacted my ability to provide greater stability in the form of financial security to both my children and my spouse and I as we get older. This seems shameful to me that taxation laws could have this kind of impact on a family. In regards to the following item: - Aspects of the tax system that are unfair. Any tax law that taxes people on potential future earnings and then does not return those taxes if the earnings are not realized is just plain unfair. In regards to the following item: - Specific examples of how the tax code distorts important business or personal decisions. For me my important decisions had to do with funding my children’s educations and providing for my wife and I in retirement. Due to the complexity and lack of correct advice in ISO/AMT matters my ability to properly plan for these items have been adversely impacted. In regards to the following item: - Goals that the Panel should try to achieve as it evaluates the existing tax system and recommends options for reform. My primary goal for this panel is to recover AMT taxes assessed in the year 2000 for exercise of ISO stock options. My secondary goal would be obviously for others who have been impacted similarly to have there AMT recovered as well. My third goal would be a review of the AMT tax laws to see if they make since and due whatever it is they were originally intended to do. If they do a new less complicated method of implementing these needs to be developed. Currently the AMT taxation rules are even to complicated for most accountants to properly explain to clients. While I have not commented on specifics of my AMT impact other than the time frames and personal feelings towards the issue, I would be more than happy to meet with the panel to discuss any specific detail of my AMT experience. I am not comfortable providing more specific details in this letter, as I am told it would be public record. Feel free to contact me. Sincerely, Todd Keen todd_keen@comcast.net |