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Ottawa, March 5,  2001
2001-024

Minister of Finance Extends Deadline for Stock Option Deferral Election

Finance Minister Paul Martin today announced that the February 15, 2001, deadline for electing to defer taxation of employee stock options exercised in 2000 will be extended. The new deadline will be 60 days after the day on which the legislation providing for the deferral receives Royal Assent.

This extension will benefit employees who wish to defer the tax on stock option benefits under the measure announced in the 2000 budget, but who missed the deadline for filing the appropriate paperwork. Specifically, employees are required to file an election to defer taxation of the stock option benefit with either the employer, the corporation granting the option or the corporation whose shares have been acquired under the option.

The February 15 deadline was first announced as part of the package of draft amendments to the Income Tax Act that was released on December 21, 2000. However, a significant number of people were unaware of the deadline.

Minister Martin noted that the deferral is a new measure and the Government understands that many companies and individuals were simply not aware of the administrative steps employees would have to go through to take advantage of it. Without this flexibility, a lot of people would face a significant and unexpected tax burden for the 2000 taxation year.

The Minister also noted that the extended election deadline will mean that, in some instances, employers will have to issue revised T4 slips, and he expressed his appreciation for employers’ co-operation in this regard.

In addition to extending the deadline for making the deferral election, Minister Martin announced another relieving measure concerning employee stock options exercised in 2000. As announced in the 2000 budget, the draft amendments require that the stock option share be listed on a Canadian or foreign prescribed stock exchange to be eligible for the deferral.

In December, however, the draft amendments introduced an additional condition that applies if the option being exercised was acquired by the employee as a result of one or more exchanges of options. Specifically, the draft amendments require that the shares that could have been acquired under each of the previous options must also have been publicly listed.

Some individuals who acquired stock option shares last year, with the expectation of being able to defer tax on the benefit, may fail to qualify for the deferral because of this additional condition. To prevent undue hardship in these circumstances, the Minister announced that this additional condition would not apply to options exercised in 2000, if the shares underlying the options were publicly listed from the time the options were granted to the time they were exercised.

More information on the deferral measure (including information on how to make an election for options exercised in 2000) is available in the backgrounder accompanying Department of Finance news release No. 2000-101, which was issued on December 21, 2000. More detailed information can be obtained by referring to the draft amendments and related explanatory notes issued under the above-noted release. All documents may be viewed on the Department of Finance Web site at the address shown below.

Printed copies of the amendments and notes are also available for $45 from the Department of Finance Distribution Centre at (613) 943-8665.

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