Deloitte Presentation

EX-99.8 9 dex998.htm DELOITTE PRESENTATION Deloitte Presentation

Taxation of Deferred

Compensation and Discounted

Stock Options: IRC Section

409A

December 14, 2005

Exhibit 99.8

General Effective Date of 409A

•

Section 409A is effective for:

–

Amounts deferred in taxable years beginning after

December 31, 2004; and

–

Amounts deferred in taxable years beginning

before January 1, 2005 if the plan under which the

deferral is made is materially modified after

October 3, 2004

What does 409A do?

•

Provides operating rules for deferred

compensation

–

Definition of deferred compensation

–

Election rules

–

Distribution rules

•

What if the operating rules aren’t followed?

–

Immediate income taxation at vesting

–

20% excise tax

–

Interest penalty

Deferred Compensation: “Mind the Gap”

•

Legally binding right to compensation received

in one taxable year, with actual or constructive

receipt of income in another

–

No legally binding right if service recipient has

discretion to reduce compensation after the services

are performed

–

Legally binding right does exist if:

•

Discretion is available only on a condition

•

Lacks substantive significance

When is equity NOT deferred compensation?

•

If nonqualified stock options and stock appreciation

rights (payable in cash or stock) are:

–

The equity right is on service recipient stock;

–

The exercise price of the equity right equals the stock’s FMV

on date of grant;

–

The equity right does not include any feature for the deferral

of compensation later than exercise or disposition;

•

Right to receive dividends before exercise must be provided for

in a separate agreement that complies with section 409A

–

The number of shares subject to the equity rights fixed on

the original date of grant of the options.

•

Incentive stock options

Determine FMV of Publicly Traded Stock

•

Last sale before or first sale after grant

•

Closing price on the trading day before or the

trading day of the grant

•

Any other reasonable basis using actual transactions

in such stock

•

An average over a period within 30 days before or

after the grant if:

–

The commitment to grant the stock at this valuation is

irrevocable before beginning of specified period

–

Used consistently for the same and substantially similar

programs

Short-Term Deferral Exception

•

Compensation actually or constructively received

by the 15

day of the 3

month following the

end of the service provider or recipient’s taxable

year in which the service provider becomes

vested

Short-Term Deferral Exception

•

Applies even with administrative delays if

unforeseeable when legally binding right

arose

–

Does not include an action or failure to take action

by the employee, such as failure to provide

necessary information

•

Payments must be made as soon as

reasonably practicable

At the time the tender offer has commenced, NVIDIA will provide option

holders

who

are

eligible

participate

the

tender

offer

with

written

materials explaining the precise terms and timing of the tender offer .

Persons who are eligible to participate in the tender offer should read

these written materials carefully when they become available because

they will contain important information about the tender offer.

NVIDIA

will also file these written materials with the U.S. Securities and

Exchange Commission as part of a tender offer statement upon the

commencement of the tender offer. NVIDIA stockholders and option

holders will be able to obtain these written materials and other

documents filed by NVIDIA with the U.S. Securities and Exchange

Commission free of charge from the U.S. Securities and Exchange

Commission's website at www.sec.gov.

In addition, stockholders and

option holders may request a free copy of the tender offer statement and

other

documents

the

tender

offer

from

NVIDIA

following

such

time that such documents become available.