When an employee exercises or settles an award such as a stock option or restricted stock unit, there is often a measure of value that must be included in the employee’s compensation income. Consequently, employers are required to withhold and remit payroll and income taxes with respect to that compensation, and employers will typically require employees to satisfy their portion of those taxes. Either the employee must come up with other sources of liquidity, or in some cases the taxes may be satisfied by “net settlement” – withholding some of the shares from the award. Two recent developments – one in the accounting arena and the second in securities law – affect how this withholding can be handled. READ MORE