The Internal Revenue Service is examining as many as 40 companies -- investigating the appropriateness of deductions for backdated stock options, as well as the reporting of income by affected executives and the relevance of the laws governing Incentive Stock Options.
According to published reports, in recent weeks, the agency has told its corporate auditors to start reviewing the tax returns of dozens of executives and companies which may have improperly reported stock option grants. The preliminary investigations are expected to take months and appears aimed at both companies that took improper tax deductions, as well as executives who might have misreported income.
More than 80 companies, many of them tech businesses in Silicon Valley, are under investigation by the Securities and Exchange Commission for potential accounting and disclosure problems, while t he Department of Justice has set up a special task force in northern California to examine potential criminal charges and issued subpoenas to at least 35 companies. Last week, the SEC brought its first criminal charges against former executives of Brocade Communications.
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