First, a little background, 409A is an IRS Code section that requires companies to grant stock options at Fair Market Value (FMV), meaning no discounts anymore. In order for a company to prove they granted stock options at FMV, they’ll need to follow the valuation rules surrounding 409A. (more…)
With the signing of the Tax Cuts and Jobs Act (TCJA) in December 2017, valuation analysts have been tasked with incorporating the changes to the tax law into their analysis. Changes, such as the lowering of corporate tax rates and restrictions on interest deductibility, must be factored into valuation analysis to capture the effects of the TCJA on company value. When valuing a US company, valuation analysts must now consider the following: (more…)
Company owners face many decisions when it comes time to transition responsibilities and ultimately ownership to the next generation. For those owners who wish to sell their shares gradually and transition out of their responsibilities over a period of years, an Employee Stock Ownership Plan (ESOP) might be the right fit. An ESOP is a qualified defined contribution employee benefit plan that primarily holds the employer company’s stock. An ESOP functions similarly to a stock bonus plan that provides a retirement benefit to employees in the form of the company’s stock. As a “qualified” plan, an ESOP is established by the employer for the benefit of the company’s employees and qualifies for certain tax benefits, both for the company and the selling owners. (more…)
Earlier this year we wrote about the looming regulations affecting valuation discounts under the IRS Proposed Section 2704 Regulations. The proposed regulations would have curbed valuation discounts, resulting in increased estate taxes on the deaths of owners of family businesses.
The Treasury, after extensive deliberation in furtherance of the policies stated in Executive Order 13789, decided to withdraw these regulations entirely for the following reasons: (more…)
The recent reports by PitchBook and the Silicon Valley Business Journal indicate that 2017 will be a healthy year for Venture Capitalists. Experts believe that the Venture Capital (VC) industry is coming back to “normal” levels after the boom of activity in 2015.
Interestingly, there was a lot of talk recently about the VC funding cooldown which raised concern about the Series A funding crunch. The recently published 1Q 2017 PitchBook report confirms that angel and seed financing continued to decline in 2017, and it is getting more difficult to secure Series A financing. In fact, first-financing activities have been falling since the middle of 2015. (more…)
Late last year, we wrote a few times about the looming regulations affecting valuation discounts under the IRS Proposed Section 2704 Regulations.
The comment period ended on November 1st and the public hearing in Washington D.C. was held on December 1st to a capacity crowd. Here are some quick highlights from the hearing that were published by BV Wire: (more…)
By Jeff Faust, Director of Valuation Services
ASL Valuation Services
Earlier this year, we wrote about the looming regulations affecting valuation discounts. Now the IRS’ Proposed Section 2704 Regulations have been officially presented and they intend to eliminate discounts currently available for gifts between family members inside family controlled entities. Despite court cases and revenue rulings to the contrary, the IRS’ proposals assume that families always work together and do not keep the restrictions in place that are the basis for the minority interest discount. (more…)
Generally, most companies understand what a 409A Valuation is and why they need it, but questions commonly arise regarding the timing and subsequent updates of their 409A Valuation. Not all of these questions have clear cut answers and ASL prides itself in helping our clients navigate these “gray areas” of 409A Valuations.
409A Valuations – Frequently Asked Questions
Here are some commonly asked questions: (more…)
By Chris Bitter, Senior Valuation Analyst and Jeff Faust, Director of Valuation Services
Taxpayers are still awaiting new tax regulation changes that may affect the valuation of family-owned entities. In April 2015, Cathy Hughes, from the Treasury’s Office of Tax Policy, announced that the Treasury would amend regulations under IRS Code §2704 around mid-September. However, the Treasury has yet to release any new regulations limiting the applicability of valuation discounts on family-owned entities. Much speculation has arisen as to what the new regulations will look like. In November 2015, senior IRS official Leslie Finlow stated “Guidance on restrictions on estate valuation discounts for certain corporations and partnerships is expected very soon and won’t be based on previous administration proposals. (more…)