Pier 1 2015 Annual Report Download - page 110

FEDERAL INCOME TAX CONSEQUENCES OF THE PLAN
Restricted Stock and Restricted Stock Unit Awards
A participant who has been granted restricted stock will not realize taxable income at the time of grant, and Pier 1 Imports will not
be entitled to a tax deduction at that time, assuming that the forfeiture restrictions constitute a substantial risk of forfeiture for
federal income tax purposes. Upon lapse of the forfeiture restrictions (i.e., as shares become vested), the participant will realize
ordinary income in an amount equal to the fair market value of the shares at such time, and subject to Section 162(m) of the
Internal Revenue Code of 1986, Pier 1 Imports will be entitled to a corresponding tax deduction. A participant who has been
awarded restricted stock may elect to be taxed at the time of grant on the market value of the restricted shares subject to the
award, in which case (i) subject to Section 162(m) of the Internal Revenue Code of 1986 as discussed below, Pier 1 Imports will
be entitled to a tax deduction at the same time and in the same amount, (ii) dividends paid to the participant during the forfeiture
restriction period will be taxable as dividends to him and not deductible by Pier 1 Imports, and (iii) there will be no further federal
income tax consequences when the forfeiture restrictions lapse. A participant who has been granted restricted stock units will not
recognize taxable income at the time of grant, and Pier 1 Imports will not be entitled to a tax deduction at that time. At the time
that either cash or common stock is delivered to a participant on account of a restricted stock unit, the participant will recognize
ordinary income in an amount equal to the amount of cash paid or the fair market value of the shares delivered, and subject to
Section 162(m) of the Internal Revenue Code of 1986, Pier 1 Imports will be entitled to a corresponding tax deduction.
Performance Awards
A participant who has been granted a performance share award will not realize taxable income at the time of the grant, and Pier 1
Imports will not be entitled to a tax deduction at that time. The participant will realize ordinary income at the time the award is paid
equal to the amount of cash paid or the value of shares delivered in payment of the award. At that time, Pier 1 Imports will have a
corresponding tax deduction which may or may not be subject to Section 162(m) of the Internal Revenue Code of 1986 as
discussed below, depending upon whether the award was intended to qualify as and did, in fact, qualify as performance-based
compensation for purposes of such Internal Revenue Code of 1986 section.
Stock Appreciation Rights and Phantom Stock
The amount received upon exercise of a stock appreciation right or upon receipt of cash or stock pursuant to an award of
phantom stock is included in taxable income of the participant at the time the cash or stock is received. In the case of receipt of
stock the amount included in income is fair market value of the stock received. Subject to Section 162(m) of the Internal Revenue
Code of 1986 as discussed below, Pier 1 Imports will be entitled to a deduction at the same time and in the same amount as the
income recognized by the plan participant.
Director Deferred Stock Units
Provided that a non-employee director’s cash fee deferral election is made prior to the beginning of the taxable year in which the
director’s services for which the fees will be earned are performed and provided further that such deferral election is irrevocable,
the director’s fees deferred by a director on an elective basis will not be includible in taxable income when earned and Pier 1
Imports will not be entitled to a deduction with respect to such fees at that time. The crediting of director deferred stock units with
respect to deferred director’s fees will not result in taxable income to the director when credited and Pier 1 Imports will not be
entitled to a deduction at that time. The crediting of dividend amounts as additional director deferred stock units will not result in
taxable income to a director when credited and Pier 1 Imports will not be entitled to a deduction at that time. At the time that
deferred stock units are exchanged into shares which are delivered to a director, the director will recognize taxable income in an
amount equal to the fair market value of the shares delivered and Pier 1 Imports will be entitled to a deduction at that time.
Withholding for Taxes
No issuance of common stock under the plan may be made until arrangements satisfactory to Pier 1 Imports have been made
for the withholding of taxes. As to awards that are payable in shares of common stock, to the extent provided in the award
agreement, a participant may direct Pier 1 Imports to withhold a number of shares of common stock from such award having an
aggregate fair market value equal to the amount of any tax required to be withheld with respect to such award. Shares withheld
for payment of tax or other withholding obligations associated with an award shall not again be available for grant under the plan.
28 PIER 1 IMPORTS, INC. 2015 Proxy Statement