Although online game developer Zynga (NASDAQ: ZNGA) will be the first company to benefit from the recent move by San Francisco to offer tax breaks on the sale of stock options following the company’s initial public offering on Friday, the City also stands to gain from the IPO of the company. It will be like setting a record for option-related payroll tax revenue from a single company.
The City made a modification in payroll tax recently as a result of which Zynga would only have to pay a maximum of $750,000 or 1.5 percent of payroll tax on the first $50 million of stock option compensation that will be given to its employees whenever they sell their shares in the company.
However, there is a catch because if Zynga’s employees had ever sold more than $50 million in stock options per year before the IPO of the company, the company’s tax rate would be higher. In such a case, its maximum tax rate on stock options would be an amount equal to 1.5 percent of that amount.
The City made a modification in payroll tax recently as a result of which Zynga would only have to pay a maximum of $750,000 or 1.5 percent of payroll tax on the first $50 million of stock option compensation that will be given to its employees whenever they sell their shares in the company.
However, there is a catch because if Zynga’s employees had ever sold more than $50 million in stock options per year before the IPO of the company, the company’s tax rate would be higher. In such a case, its maximum tax rate on stock options would be an amount equal to 1.5 percent of that amount.
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