Section 83(b) Election Form
(Profits Interest)

Summary

This template is for an individual to make a protective Section 83(b) election upon receiving a profits interest from a partnership or limited liability company. It contains practical guidance, drafting notes, and an optional clause. Partnerships or entities taxed as partnerships (e.g., limited liability companies) making grants of profits interest awards should provide this form upon the grant of the award to recipients so that they may file a tax election under I.R.C. § 83(b) with the Internal Revenue Service. A properly filed Section 83(b) election ensures that the award recipient may include in ordinary income the fair market value of the award ($0 in the case of a so-called safe harbor (or true) profits interest) immediately as of the date the award is granted. Rev. Proc. 2001-43 (applicable to safe harbor profits interests under Rev. Proc. 93-27). Any gain or loss in the value of the award from the date of grant to the date of sale is taxed at capital gain rates. I.R.C. § 83(b); Treas. Reg. § 1.83-2(a). Part of this template provides instructions to the award recipient and the effect of a properly filed election form. Part provides a model template to be completed and submitted to the IRS and the partnership by the award recipient. Part provides a cover letter to the IRS for the election form. Section 83(b) elections must be sent to the IRS within 30 days of the grant date. The IRS began providing a form that may be used for this purpose in 2024. See IRS Form 15620. For a full listing of key content covering equity incentive plan considerations, see Equity Incentive Plan Resource Kit. For background, see Taxation of Compensatory Transfers of Property (IRC § 83). For a similar template to be used in connection with a restricted stock award, see Section 83(b) Election Form (Restricted Stock). For more in-depth coverage of the federal taxation consequences of the filing of Section 83(b) election templates for various types of equity awards, see Lexis Tax Advisor -- Federal Topical § 1A:14.07. For more information on types and taxation of partnership equity compensation (including profits interest awards), see Partnership and LLC Equity Compensation and Profits Interests as Incentive Compensation.