Waste Management 2013 Annual Report Download - page 72

With respect to both nonqualified stock options and incentive stock options, special rules apply if a
participant uses shares of Common Stock already held by the participant to pay the exercise price or if the shares
received upon exercise of the stock option are subject to a substantial risk of forfeiture by the participant.
Stock Appreciation Rights.A participant generally will not recognize taxable income upon the grant or
vesting of an SAR with a grant price at least equal to the fair market value of our Common Stock on the date of
grant and no additional deferral feature. Upon the exercise of an SAR, a participant generally will recognize
compensation taxable as ordinary income in an amount equal to the difference between the fair market value of
the shares underlying the SAR on the date of exercise and the grant price of the SAR.
Restricted Stock Awards, Phantom Stock Awards (including Restricted Stock Units), and Performance
Awards.A participant generally will not have taxable income upon the grant of restricted stock, phantom stock
awards, including restricted stock units or performance awards. Instead, the participant will recognize ordinary
income at the time of vesting or payout equal to the fair market value (on the vesting or payout date) of the shares
or cash received minus any amount paid. For restricted stock awards only, a participant may instead elect under
Code Section 83(b) within 30 days of the date of transfer of the restricted shares to be taxed at ordinary income
tax rates on the full fair market value of the restricted shares over the purchase price, if any, of such shares. If the
election is made, the basis of the shares so acquired will be equal to the fair market value at the time of grant plus
the purchase price (if any) paid by the participant. No tax will be payable upon the subsequent lapse or release of
the restrictions, and any gain or loss upon disposition will be a capital gain or loss.
Unrestricted Stock Awards.Upon receipt of an unrestricted stock award, a participant generally will
recognize compensation taxable as ordinary income in an amount equal to the excess of the fair market value of
the shares at such time over the amount, if any, paid by the participant with respect to the shares.
Other Stock or Cash-Based Awards.The U.S. federal income tax consequences of other stock or cash-
based awards will depend upon the specific terms of each award.
Tax Consequences to the Company.In the foregoing cases, we generally will be entitled to a deduction at
the same time, and in the same amount, as a participant recognizes ordinary income, provided that, among other
things, the income meets the test of reasonableness, is an ordinary and necessary business expense, is not an
“excess parachute payment” within the meaning of Code Section 280G and is not disallowed by the $1,000,000
limitation on certain executive compensation under Code Section 162(m) described above.
Code Section 409A.Certain awards under the 2014 Plan may be considered “nonqualified deferred
compensation” subject to Code Section 409A, which imposes additional requirements on the payment of deferred
compensation. Generally, options and SARs with an exercise price at least equal to the fair market value of the
underlying Common Stock on the date of grant and restricted stock will not be considered deferred compensation
if such awards do not include any other feature providing for the deferral of compensation. Failure to follow the
provisions of Code Section 409A can result in taxation to the grantee of a 20% additional tax and interest on the
taxable amount and, depending on the state, additional state taxes. We intend that awards granted under the 2014
Plan comply with, or otherwise be exempt from, Code Section 409A, but make no representation or warranty to
that effect.
Employment Tax. In general, the amount that a participant recognizes as ordinary income under an award
also is treated as “wages” for purposes of the Federal Insurance Contributions Act (“FICA”). The participant and
the company must pay equal amounts of federal employment tax under FICA with respect to the participant’s
wages. Such amounts are subject to tax withholding by us.
Tax Withholding.We are authorized to deduct or withhold from any award granted or payment due under
the 2014 Plan, or require a participant to remit to us, the amount of any withholding taxes due in respect of the
award or payment and to take such other action as may be necessary to satisfy all obligations for the payment of
applicable withholding taxes. We are not required to issue any shares of Common Stock or otherwise settle an
award under the 2014 Plan until all tax withholding obligations are satisfied.
63