Over $100bn in accounting and tax charges may await electric-car maker and CEO if they are forced to abandon 2018 deal
Tesla has vowed to press on with its fight to restore Elon Musk’s historic pay package, and failure could have a high cost: the potential for more than $100bn in tax and accounting charges for the company and its chief executive. Delaware judge Kathaleen McCormick recently denied the electric vehicle maker’s second attempt to give Musk the largest package of stock options in history — worth $56bn at the time of the original ruling and more than $129bn at the current share price.
Moore said attempting to award a new deal with the same terms now could breach section 409A, which “triggers the immediate taxation of the full value of deferred compensation on the date it is vested, well before the deferred compensation would be taxable under normal rules”. “To add insult to injury, section 409A would impose an additional 20 per cent tax on the value,” Moore wrote in an article in the influential journal Tax Notes Federal. “The damage is done on the date of grant.
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