CenturyLink 2015 Annual Report Download - page 37

Tax Withholding. We may withhold from any payments or share issuances under the Plan, or collect as a
condition of payment, any taxes required by law to be withheld. The participant may, but is not required to,
satisfy his or her withholding tax obligation by electing to deliver currently-owned Common Shares, or to have
us withhold shares from the shares the participant would otherwise receive, in either case having a value equal to
the minimum amount required to be withheld. This election must be made prior to the date on which the amount
of tax to be withheld is determined. The Committee has the right to disapprove of any such election, except for
participants who are subject to Section 16 of the Exchange Act.
Purchase of Incentives. The Committee may approve the repurchase by CenturyLink of an unexercised or
unvested Incentive from the holder by mutual agreement, so long as the repurchase would not constitute the
repricing of an option or SAR.
Federal Income Tax Consequences
The federal income tax consequences related to the issuance of the different types of Incentives that may be
awarded under the Plan are summarized below. Participants who are granted Incentives under the Plan should
consult their own tax advisors to determine the tax consequences based on their particular circumstances.
Stock Options. A participant who is granted a stock option normally will not realize any income, nor will
we normally receive any deduction for federal income tax purposes, in the year the option is granted.
When a non-qualified stock option granted under the Plan is exercised, the participant will realize ordinary
income measured by the difference between the aggregate purchase price of the shares acquired and the
aggregate fair market value of the shares acquired on the exercise date and, subject to the limitations of
Section 162(m), we will be entitled to a deduction in the year the option is exercised equal to the amount the
participant is required to treat as ordinary income.
Incentive stock options may only be granted to employees. An employee generally will not recognize any
income upon the exercise of any incentive stock option, but the excess of the fair market value of the shares at
the time of exercise over the option price will be an item of tax preference, which may, depending on particular
factors relating to the employee, subject the employee to the alternative minimum tax imposed by Section 55 of
the Code. The alternative minimum tax is imposed in addition to the federal individual income tax, and it is
intended to ensure that individual taxpayers do not completely avoid federal income tax by using preference
items. An employee will recognize capital gain or loss in the amount of the difference between the exercise price
and the sale price on the sale or exchange of shares acquired pursuant to the exercise of an incentive stock option,
provided the employee does not dispose of such shares within two years from the date of grant and one year from
the date of exercise of the incentive stock option (the holding periods). An employee disposing of such shares
before the expiration of the holding periods will recognize ordinary income generally equal to the difference
between the option price and the fair market value of the shares on the date of exercise. The remaining gain, if
any, will be capital gain. We will not be entitled to a federal income tax deduction in connection with the
exercise of an incentive stock option, except where the employee disposes of the shares received upon exercise
before the expiration of the holding periods.
If the exercise price of a non-qualified option is paid by the surrender of previously-owned shares, the basis
and the holding period of the previously-owned shares carry over to the same number of shares received in
exchange for the previously-owned shares. The compensation income recognized on exercise of these options is
added to the basis of the shares received. If the exercised option is an incentive stock option and the shares
surrendered were acquired through the exercise of an incentive stock option and have not been held for the
holding periods, the optionee will recognize income on such exchange, and the basis of the shares received will
be equal to the fair market value of the shares surrendered. If the applicable holding period has been met on the
date of exercise, there will be no income recognition and the basis and the holding period of the previously
owned shares will carry over to the same number of shares received in exchange, and the remaining shares will
begin a new holding period and have a zero basis.
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