[s1artibartfast]

Can they not just let the old RSU was expire and provide new grants with an equivalent number of shares?

That prevent the tax on exercising non liquid shares.

Similarly, why not just offer to buy the stock back at current valuation and leave it up to the employees to settled any taxes

[bzax]

They certainly can let the old RSUs expire worthless, but holding up the "social contract" (as opposed to the strict legal contract) with their employees (and former employees!) while also not drawing the ire of the IRS may be a challenge.

If you give new RSU grants, what time period do they vest over? What happens to current employees who leave before then, if they are required to re-earn-out their comp? What can you do at all about former employees? Will the IRS still accept that this deferred compensation is subject to "substantial risk of forfeiture" and thus the taxes on it can be deferred (see U.S. Code 409A)?

Stripe is trying to do option b), buy back stock at current valuation. To do so, they need to raise a couple billion dollars. That money will go to the employees (in exchange for some stock) so that the employees can settle up their taxes, though the IRS will "cut out the middleman" so to speak, and requires Stripe to simple withhold the proceeds and remit to the IRS on the employees' behalf.

The $3.5B tax bill is not "corporate tax" owed by Stripe, but employee income tax that will be owed by employees if there is a liquidity event, and which Stripe will be, in practice, required to withhold on their behalf if Stripe arrange that liquidity for them.

[s1artibartfast]

I don't think the company would be in trouble with the IRS if the rsu's are not exercised. I also don't think it would be breaking the social contract if the employees were granted new replacement rsu's with term limits that aren't contingent on employment. It's not that different then unemployed sitting on vested stock waiting for an IPO or liquidity event.

Maybe I don't understand something in the tax law, which is entirely possible.

Whether this is a good deal for the employees remains to be seen and depends on the spread between the current buyback value and the eventual IPO price.

[alecbz]

The whole point of the double-trigger RSU situation is to create a "meaningful risk of forfeiture". It's only that condition that makes the IRS okay with not taxing the RSUs until they're liquid. If employers just top up employees when their old RSUs expire, there really isn't any meaningful risk of forfeiture anymore.

I don't have a full understanding of exactly what language in which laws/documents govern this, but my general understanding is that the IRS would definitely not be happy about that, as it undermines the whole point of the double-trigger RSU.

[gibolt]

Sitting on vested stock is different than being granted new stock (as a replacement) without being a current employee. That may open Stripe up to some additional tax/liability.

[kgwgk]

> I don't think the company would be in trouble with the IRS if the rsu's are not exercised. I also don't think it would be breaking the social contract if the employees were granted new replacement rsu's with term limits that aren't contingent on employment.

But the company and employees would definitely be in trouble with the IRS if they were granted new replacement rsu's with term limits that aren't contingent on employment.

[jcdavis]

Issuing new grants almost certainly falls afoul of the law around tax-deferred equity that requires "Substantial risk of Forfeiture".