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Under new regs issued Monday by the Treasury Department and the IRS, employee-holders of ISOs have the ability to acquire employer stock without realizing income when the option is exercised. The regulations finalize, with minor changes, regulations proposed last summer.

Capital gains treatment is permitted if the employee holds the stock for a required period, the exercise price for the ISO is no less than the fair market value of the underlying stock on the date the ISO is granted, and the ISO plan was approved by shareholders. Additionally, the amount of ISOs that can be granted to an employee is limited.

The final regulations generally will be effective on the earlier of January 1, 2006 or the first regularly scheduled stockholders meeting occurring at least six months after the publication of the final regulations.

New “Lead Director” Practice Area

We have created a new “Lead Director” Practice Area, including FAQs on board leadership and examples from companies’ corporate governance principles and proxy statement disclosures. Check it out.

-Submitted by Julie Hoffman