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83(b) Elections - General Information and Instructions

Introduction

This article will provide information on 83(b) Election requirements and filings and provide instructions for preparing the filing through the workflow.

Click the links to jump to that section of the article: 

What is an 83(b) Election?

83(b) refers to a section of the U.S. tax code that allows a holder to change the tax treatment for restricted stock, i.e., an equity grant that is subject to vesting (or risk of forfeiture). Grants subject to vesting can come in the form of founder grants, restricted stock grants to early employees, or stock options that an employee exercises early. 

Essentially, you can accelerate the calculation and payment of income tax for the entire amount of an equity grant that will eventually vest, and this calculation and payment is at the equity’s value as of the date you purchase it, rather than at its value when it vests over time (typically at higher values).

It is important to note that an 83(b) election isn’t for everyone. It only applies to those who receive restricted stock in connection with services they perform for the company, i.e., founders, employees, or contractors, and only for grants that have a vesting schedule.

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IMPORTANT - 83(b) Election filing timing

If you choose to make the 83(b) election, it must be filed within 30 calendar days of acquiring the restricted stock.

The IRS is very strict about the 30 calendar day deadline - there are no extensions available. 

Fidelity Private Shares will start the 30-day window based on the type of grant, and how it was added to the platform.

Generated RSAs

If an RSA is issued in Fidelity Private Shares through the Grant Shares workflow, then the 30-day window starts on the associated grant acceptance date of the RSA. When this workflow is completed and the holder has accepted the RSA, they can run the Make 83(b) Election workflow. 

This workflow will default the grant acceptance date to be the date the grantee completed the Grant Acceptance workflow. If you are uploading an approval that happened more than 30 days in the past and you do not change the grant acceptance date, then the holder will not be able to run the Make 83(b) Election workflow in the platform. You may want to consult with your legal counsel for situations where the grant date is close to or more than 30 days in the past.

Uploaded RSAs

The Grant Shares workflow allows you to upload grants that were executed outside of the platform. For an RSA that has been uploaded, the 30-day window starts on the date associated with the grant acceptance date. If applicable, the holder can run the Make 83(b) Election workflow once the Grant Shares workflow is completed.

Stock Options

For any options that have been early exercised, the 30-day window starts on the exercise date. The holder will be able to run the Make 83(b) Election workflow once they complete the exercise workflow. If they file an 83(b) election and the exercise is not approved, there are no consequences to the grantee.

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The Make 83(b) Election Workflow

This workflow has two paths, one to generate and prepare the 83(b) Election form, and one to upload a copy of an 83(b) Election form already filed with the IRS. When you receive proof of filing from the IRS, you can return to this workflow to upload the proof. 

Generating the 83(b) Election form

The steps below outline how to generate the 83(b) election form and cover letter in Fidelity Private Shares.

It is your responsibility to print and mail the 83(b) Election form to the IRS. 

  1. On your workspace, click Start a new workflow > Equity > Make 83(b) Election. 
  2. Select the applicable grant from the dropdown menu and click Continue.
  3. Select to have the platform generate the 83(b) form, and if you wish to sign the form electronically, or to print and manually sign the form.
  4. Enter your tax ID number, the fair market value (FMV) of the shares you purchased, and the number of shares that are subject to vesting in the selected grant, and the amount of money you paid for the shares. The platform will provide some of this information for reference; you may wish to consult with your company's equity administrator or a tax advisor.
  5. If you selected to sign the form electronically, review the document and then click Sign Document. If you selected to print and sign manually, this step will be skipped. 
  6. Click Download PDF to save a copy of the generated form.
  7. Follow the steps listed here, or you can view our our blog post with additional information on sending your 83(b) to the IRS. 

    Send the form and cover letter with a self-addressed stamped envelope via certified mail. Again, the IRS is very strict about the 30-day deadline. Therefore, it is best to send it via certified mail with a return receipt requested and do so as soon as possible. This serves as proof that you sent it within the time window. Keep a copy of the filing and mailing materials for your records. 

    Note that where you send your filing depends on where you live; you can consult this page to find the address for your IRS office (this will be the same office where you send your tax returns).
  8. At this point you can close out of the workflow until you have received receipt of filing from the IRS. 
The IRS has not been sending confirmations of 83(b) Election receipt over the past couple of years, so even if you include a self-addressed, stamped envelope and extra copy of your filing, you may not receive that back.

Uploading an 83(b) Election Form already filed with the IRS

The steps below outline how to upload an 83(b) Election that was already filed with a different form or letter to share with the issuing company. 

On your workspace, click Start a new workflow > Equity > Make 83(b) Election.

  1. Select the applicable grant from the dropdown menu and click Continue.
  2. Select Provide my company with a copy of the 83(b) I have already filed with the IRS and click Continue.


  3. Click Document Options > Upload from computer.
  4. Click on Choose a file to select the document from your computer. You can edit the document title from this screen as well. When uploaded, click Save. 
  5. Enter the details of the filing and click Continue. You'll need to provide the effective date of the 83(b) filing, date of stock transfer, number of unvested shares, fair market value (FMV) at the time of issuance, the amount you paid to obtain the shares, and the taxable year. The platform will provide some of this information for reference; you may wish to consult with your company's equity administrator or a tax advisor.
  6. At this point the copy of the 83(b) has been uploaded. You can view the document in the My Documents section of your workspace. 

Upload receipt of filing from the IRS

When you have received receipt of filing your 83(b) Election, you can resume the workflow to upload the proof. 

  1. On your workspace, click on the pending 83(b) workflow in the My Tasks section. 
  2. Check the box indicating your have filed the 83(b) and have received proof of receipt.
  3. Click on Document Options to either upload the document from your computer or to select it from the Data Room. 
  4. Enter the date the 83(b) Election was sent to the IRS and click Continue.
  5. At this point your 83(b) filing is complete. You can view the documents in the My Documents section of your workspace.

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Screenshots are for illustrative purposes only.

 Fidelity Private Shares LLC provides cap table management and/or other administrative services to private companies and their equity compensation plans, and to investors in the private markets.

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