83(b) Election

An 83(b) Election is a provision in the Internal Revenue Code which allows the recipient of restricted stock to pay taxes on the fair market value of the shares as of the date of grant. Typically, restricted stock is granted to founders and other early-stage company employees. 83(b) allows the holder of restricted stock to pay taxes based on what should be a much lower valuation (when the stock is granted) versus when it is vested (much later than when granted). An 83(b) election is due to the IRS within 30 days after the grant of the restricted stock.