Receiving equity from a U.S. company if you are not a U.S. citizen or resident alien can raise questions about how and when that equity is taxed in the United States. For U.S. tax purposes, these individuals are generally referred to as “nonresident aliens” or “non-U.S. persons.” One common consideration is whether to file an 83(b) election, a time-sensitive U.S. tax election that can significantly affect how restricted stock or similar property is taxed. While the rules are the same in many respects, non-U.S. persons face additional nuances regarding tax residency, U.S. source income, and filing requirements. This FAQ outlines when a non-U.S. person may benefit from an 83(b) election, what’s required to make one and how the process works.
The 83(b) election lets taxpayers report income from restricted stock or other property received in exchange for services when they get the property, not when it vests, which is the default treatment under section 83(a) This means you can choose to recognize income right away, often at a lower value, instead of waiting until the vesting date, when the value may be higher. Remember, you must file the 83(b) election within 30 days of the grant date.
For more details on the 83(b) election and how to file, see our previous article: The Section 83(B) Election: An Important Tax Strategy.
For purposes of an 83(b) election, “property” generally means actual stock, or other tangible or intangible property transferred in connection with the performance of services.
This includes restricted stock awards (RSAs), where the individual receives actual shares of stock at grant, even if those shares are subject to vesting or forfeiture restrictions.
However, restricted stock units (RSUs) are not considered property under Section 83. RSUs represent an unfunded and unsecured promise to deliver shares (or a cash equivalent) in the future, contingent on vesting. Because no shares are transferred at grant, an 83(b) election is not available for RSUs.
Yes. Non-U.S. persons may make an 83(b) election, but whether it is beneficial depends on where services were performed, when the equity was granted and the individual’s U.S. tax residency at vesting and sale. Here are the top six questions to consider when making that decision:
If equity is received in connection with services performed in the United States, the income is generally treated as U.S. source income and subject to U.S. federal income tax. In this situation, an 83(b) election may allow the non-U.S. person to recognize income at grant, potentially at a lower value, rather than at vesting.
If the equity is expected to appreciate during the vesting period, making an 83(b) election generally results in a lower cost basis than if income were recognized at vesting. This may lead to larger capital gains when the property is sold, even though current income may be lower.
It may. If the individual expects to be a non-U.S. person at the time the equity is sold, capital gain from the sale of personal property is generally treated as foreign source income when realized by a nonresident. In that case, higher future capital gains may be less of a concern from a U.S. tax perspective.
If equity was granted before immigrating to the United States and relates to services performed outside the United States, an 83(b) election may allow income recognition to occur during a period when the individual had no U.S. federal income tax exposure.
If an 83(b) election was made and the individual later becomes a U.S. resident before vesting, no additional U.S. tax is generally imposed at vesting. U.S. tax would typically arise only when the equity is sold.
If no 83(b) election is filed and the equity vests after the individual becomes a U.S. tax resident, the entire fair market value of the equity at vesting is generally subject to U.S. tax at that time.
If you are a nonresident making this election, you need either:
To get an ITIN, submit Form W-7. If you do not have an ITIN or SSN when filing the 83(b) election, include a copy of your application and write “Applied For” in the TIN field on Form 15620. Once you receive your identification number, you can update the IRS. If you do not apply for an ITIN or SSN, you may write “Foreign Individual,” “Nonresident,” or “N/A” in the field but be aware that the IRS may not process your election without an identification number.
To make a valid election, the nonresident must also provide:
You must make the 83(b) election within 30 days of receiving the property. There are no extensions, so act quickly once you decide to file. The IRS now offers a standardized form to make 83(b) elections, IRS Form 15620. If filing by mail, nonresidents should send the election to:
Department of the Treasury, Internal Revenue Service, Austin, TX 73301-0215, USA
You want to be certain about your decision. Revoking the election is difficult and only possible within 30 days of the original filing, with a valid reason.
If a self-addressed, stamped envelope is provided with the 83(b) election, the IRS will mail a copy back to the applicant showing a stamped receipt date. An election will be deemed timely if it is mailed by the end of the 30-day election period, even if it is stamped after that date. To ensure proof of timely mailing and delivery, the applicant should transmit the election using USPS Certified Mail or another tracked mailing service such as FedEx or UPS.
For non-U.S. persons receiving equity from a U.S. company, an 83(b) election can be a powerful planning tool. Because eligibility, tax exposure and filing requirements can vary based on where services are performed and whether U.S. tax residency may change in the future, it’s important to carefully evaluate the decision before filing. If you’re unsure how an 83(b) election applies to your situation, consulting with a qualified tax advisor can help ensure the election aligns with your broader tax and mobility considerations.
If you have questions about how this may affect your situation, please contact our team. We’re here to help you navigate the process with confidence.
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