San Francisco Wants to Tax Your Stock Options, All of Them

Although San Francisco authorities haven't enforced it, the local government does have tax provision that requires companies to pay a payroll tax on gains from employee stock options. However, with tax revenues down, many are wondering if the city will take action to collect these funds. Desperate times, right?

From TechCrunch.com:

Recently, I heard San Francisco Mayor Ed Lee on our local NPR station talking about how important it was to keep Twitter’s headquarters in San Francisco. To those worried that the recent talks between Twitter and the City were stalling, his words must have been reassuring. But if Lee really wants to keep Twitter– and thousands more tech jobs– in San Francisco he needs to defuse this much bigger ticking tax time-bomb now. This isn’t just about keeping Twitter in San Francisco– this has ramifications for San Francisco’s entire startup ecosystem.

To be clear, this is not a trend. Even the federal government considers taxing these options off the table, and we haven’t been able to find a single city in the United States with such a far-reaching tax policy. This would create potentially huge costs for startups that they can sidestep simply by moving a few miles to the North, East or South. If enforced, expect an exodus of San Francisco jobs to surrounding areas.

The provision: Section 902.1 of the San Francisco Business and Tax Code. It was amended in 2004 to include stock options. Here’s the relevant text of the provision (bolding added):

SEC. 902.1. – PAYROLL EXPENSE.

(a) The term “Payroll Expense” means the compensation paid to, on behalf of, or for the benefit of an individual, including shareholders of a professional corporation or a Limited Liability Company (“LLC”), including salaries, wages, bonuses, commissions, property issued or transferred in exchange for the performance of services (including but not limited to stock options), compensation for services to owners of pass-through entities, and any other form of compensation, who during any tax year, perform work or render services, in whole or in part in the City; and if more than one individual or shareholders of a professional corporation or members of an LLC, during any tax year performs work or renders services in whole or in part in the City, the term “Payroll Expense” means the total compensation paid including salaries, wages, bonuses, commissions, property issued or transferred in exchange for the performance of services (including but not limited to stock options), in addition to any compensation for services to owners of pass-through entities, and any other form of compensation for services, to all such individuals and shareholders of a professional corporation or members of an LLC.

Read more here...

Why it's Time to Tax Internet Sales

From PC World.com:

Buying an $800 couch or television via the tax-free Internet can be nearly $80 cheaper than a purchase made in a high-sales-tax city like San Francisco -- such a deal. But the free ride is costing states and cities billions of dollars a year, and it damages local businesses that find it hard to compete.

The Main Street Fairness Act, introduced this month by Rep. Bill Delahunt (D-Mass.), would end the exemption for big Web retailers like Amazon.com and eBay that fear the change would be a body blow to their business. The Web sales tax issue has been debated and litigated for years, and it is hardly a popular cause, but with state and local governments deeply in debt, the chance to add a massive revenue stream may outweigh the political risks.

The seven-term Delahunt will not be running for re-election, but it would be unfair to see the timing as opportunistic. Delahunt sponsored a similar bill in 2008. I don't enjoy paying taxes any more than the next guy, but Delahunt was right then and he's right now. The Internet is no longer a baby that needs to be cosseted and protected from the real world, and favoring Internet business over brick-and-mortar ones via a tax exemption is not fair.

The budget hole provides the necessary opening for equal taxation

If you want government services, someone has to pay for them. The amount of money governments are losing due to the exemption is staggering. Uncollected use taxes (a use tax is pretty much the equivalent of a sales tax) for the six-year period ending in 2012 will range from $52 billion to $56 billion nationally, according to a 2009 study by economists at the University of Tennessee. New York City alone will lose at least $390.6 million in 2012; Chicago $229 million, they predict.

Man accused of 'bomb bag' threat at IRS office

On August 17, 2009 a man threatened an IRS employee when he handed her a note that read, “Bomb bag,” and gestured to his back pack during his visit to a San Jose IRS office. Today that man was charged in federal court.

The day of the scare, the IRS employee is said to have quickly hit a panic alarm and then special agents evacuated the building and detained the suspect. According to the San Francisco Chronicle, the suspect was taken into custody for psychiatric evaluation that day. However, a bomb was not found.

Read the full article here and tell me what you think.

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San Francisco Sets U.S. Example by Using Property Taxes to Finance Green Upgrades

San Francisco Mayor Gavin Newsom signed new legislation yesterday allowing homeowners and businesses to finance eco-friendly upgrades through their property taxes. It is reported that the program is the largest of its kind, and the Mayor hopes it will start a trend among local government agencies. Supporters of the program hope it will create jobs in the San Francisco area as well.

"This green financing program is going to create green jobs and prompt the next wave of energy and water efficiency as well as renewable energy development in San Francisco," Newsom said in a statement. "It helps home and property owners overcome the large up-front costs of major environmental improvements."

Beginning in March, San Franciscans will be able to seek financing from the Property Assessed Clean Energy (PACE) program, which will make $150 million in bonds available, according to Renewable Funding, a private group that will put up the capital and administer the program at no cost to the city.

"San Francisco is once again leading the way by establishing the largest PACE program in the nation to date," said Cisco DeVries, president of Renewable Funding, based in Oakland.

Studies show that up-front costs are often the main barrier that keeps property owners from making green upgrades. PACE programs aim to remove that barrier.

Continue reading at USA Today.com…

San Francisco Residents Top List Of Tax Procrastinators

A new study has found that San Francisco residents top the newest tax procrastination list, according to the Wall Street Journal. You can find a snippet of the article below, but the full story can be found here.

The City by the Bay is No. 1 on TurboTax's eighth annual list of Top 10 procrastinating cities, based on how many people used TurboTax's online service to file on the last two days of the filing season in April 2008.

Houston, which has been the No. 1 city three times - more than any other locale - came in at second place, while New York, which has been on the Top 10 list all eight years, came in at third.

Chicago, No. 1 last year, was in fourth place this year, followed by San Diego. Phoenix, Seattle, Los Angeles, Dallas and Las Vegas rounded out the list.

You're not alone

Still not done with your taxes? You're not alone. While almost 78 million U.S. taxpayers filed returns to the IRS through March 20, that still leaves at least another 46 million taxpayers to file in the four weeks from March 20 through April 17 - about 11.5 million taxpayers per week - based on 2007 IRS filing statistics.

The 2008 filing season was an anomaly because people who don't usually file did so to claim that year's stimulus payment. Last year, 137 million returns were filed by April 19, 2008, up from 124 million the year before.

Don't rush

At this point, people are likelier to rush. If that describes you, slow down -- and don't assume your return this year will be similar to last year's.

"With more people having reduced income, they may find that the deductions and credits with income phase outs that made them ineligible in the past, are available to them this year," said Bob Scharin, senior tax analyst with Thomson Reuters' tax and accounting business.

Tax breaks with income phase outs include the child tax credit, education credits and tuition deduction, and deductible IRA contributions. If your income has decreased over the year, check whether you're now eligible for those and other breaks.

"People who had a large drop in income should also look to see if they're entitled to a medical expense deduction this year," Scharin said. To take the deduction, your medical expenses must exceed 7.5% of adjusted gross income. A combination of lower income plus potentially higher health costs - such as paying for Cobra or individual health insurance - could mean you're now eligible.

Bonds Sits Out Second Game In A Row Due To Injury

According to SFgate.com, Barry Bonds was out of the lineup for the second game in a row but vowed not to go on the disabled list. "I'm not going on the DL. Don't count on me seeing the DL at all," Bonds said. "I won't let myself. I'll work hard. I'll do what I have to do to make sure I don't go there ... unless I get hit by a truck. I'll play through it." He later claimed that he expects to return to the lineup for the series finale tonight. "I was sore (last week) in New York. This kept escalating," Bonds said. "Normally, I'd get through it. I'd never had shin splints. It started hurting in my knees, bad. ... Today, I feel good. I feel I can go out there and play."