Redesigned 409A Acceptance Flow


What’s new?

We have redesigned the way you review and accept your 409A valuation on Carta. This new design presents you first with a quick summary of the analysis along with a note from your analyst letting you know the next steps in finalizing your fair market value (FMV). Once you have reviewed the report, if you have any questions you can contact our team of valuation experts through the support module in the valuation review portal. Lastly, receive board approval from within or outside of Carta to finalize the current FMV on your account. 

How it Works

Once you receive an email notifying you that your valuation is ready for review, you can follow the link within that email to access the 409A ledger where you are able to review and download your valuation. Alternatively, you can navigate to the page within Carta at Compliance > 409A Valuation.




Review your valuation

From the 409A Ledger, once you select ‘Review 409A report’ you will be directed to the valuation review portal. Here you will find an overview of the analysis performed and the concluded FMV along with a note from your valuation analyst informing you of next steps and noting any details within the report that warrant extra attention. Once you have reviewed the analyst’s note and valuation summary, you can download the full report or access the support module from the valuation review portal to access support articles or get in touch with our team of valuation experts. 


Get board approval

Now that you have reviewed the valuation, the next step is to send it to your board for review. You can do so using the board consent feature within your Carta account to easily track acceptance from each board member within the Carta platform. Once all board members have submitted their board approval through the platform, your valuation will automatically be accepted on Carta. If you got approval outside of Carta, that’s great too, simply select ‘My board has approved’ to accept the valuation to finalize the current FMV in your account. Once finalized, the new FMV will be visible to your option holders on Carta.




Revenue Procedure 2002-50 (Company Tax and Compliance)

What's new?

Carta has made it easier for private companies running a tender offer to invoke IRS Revenue Procedure 2002-50, which is applicable to certain transactions involving the exercise of options and sale of the resulting securities during a transaction on the same day. This procedure allows for the exclusion of those same day option sales from Form 1099-B reporting if certain conditions are met. For example, this may apply to cashless exercised options in connection with a secondary transaction on Carta where there is no capital gain (Sale Price = Fair Market Value).

How does it work?

To make a Revenue Procedure 2002-50 election on an applicable transaction, company administrators may request an Officer Certificate template from Carta to complete and get signed by a Company Officer who has the authority to make decisions on the tax treatment of cashless exercises in a tender offer.

Fig 1: Sample of an Officer Certificate

The completed form can then be returned to Carta, who will then trigger the Revenue Procedure. 

Any employee whose transactions on Carta were excluded from 1099-B reporting as a result of Revenue Procedure 2002-50 will, if applicable, receive a supplemental Disclosure Statement detailing the fees and gross proceeds on cashless exercises of options so they can complete their Form 8949 reporting. Compensatory income from cashless exercises is reported as ordinary income on the W-2.  

This statement will be delivered electronically by February 15th of the following year in the same manner as all other tax documents on Carta. No such statement will be generated if the employee was not charged any fees by Carta.

Fig 2: Sample of IRS Revenue Procedure 2002-50 Disclosure Statement

The company administrator can also generate a new report of all the Disclosure Statements issued after the transaction. The Revenue Procedure Disclosure Statements Report will assist in auditing transactions ahead of the tax season to ensure completeness and accuracy for tax filing purposes. The report can be found under your Reports section in Carta.   

Fig 3: Sample of Disclosure Statements Report

Make tax reporting easier for same-day option exercises and sales during a tender offer by invoking Revenue Procedure 2002-50

The Revenue Procedure feature will:

  • Remove an employee’s burden to reconcile their Form 1099-B and Form W-2 when determining their Taxable Income after a same day option exercise and sale
  • Reduce the risk of paying capital gains tax on proceeds that were already taxed as ordinary income

Reach out to Carta to get the process started

Is your company running a tender offer? If so, the Revenue Procedure 2002-50 will be enabled on the platform after returning a completed and signed Officer Certificate to Carta. Companies who ran a tender offer previously in 2022 can retroactively upload the appropriate Officer Certificate to benefit from this feature until the end of 2022. Please contact your CSM or Liquidity representative for more information.


Introducing the ability to transfer interests

Admins can now easily transfer interests from one holder to another in the event of a secondary transaction or sale of shares.

Transfer interests and maintain a record of the transaction

When transferring an interest, you’ll need to input the recipient, date of transfer, price, quantity, reason, and add any acceptance documents and additional fields for issuing the new interest. Only outstanding and vested units can be transferred to other interest holders. 

Once an interest transfer is completed, your cap table is automatically updated and transfer events are appended to the interest history so there is a clear record of the transaction.

Get started

Start an interest transfer by selecting items on the Interests and Interest Types page, then clicking the Actions button. Only full-administrative users can transfer interests. For more information, visit our support site.

New 409A dashboard with a valuation ledger

The new dashboard provides you visibility into valuations completed by Carta, the board, or investors.

Streamline valuations and audits

The new dashboard streamlines valuations and audits by allowing you to:

  • Request a 409A valuation from Carta and see the status of the request
  • Gain visibility into the latest valuation, including the per unit value and expiration date
  • Record an investor or board determined valuation and upload the valuation document
  • Gain visibility into all previously completed or recorded valuations in the valuation ledger

Get started

Admins can find the new dashboard under the Valuations tab. For more information, visit our support site.

Waterfall modeling enhancements

You can now include any option grants in the waterfall and customize vesting conditions.

Easily model future scenarios with more options for waterfall modeling

When running a waterfall, Rights and Preferences now include option grants so that they can participate in the waterfall and you can determine their payout. Option grants participate in the waterfall based on their strike price or per unit threshold value.

Additionally, you can now set the exit date when running a waterfall and choose a vesting treatment to either include all interests fully vested or only vested quantities as of exit date. Setting an exit date in the future and choosing the vesting treatment allows you to more accurately model future scenarios.

Get Started

You can find these enhancements under the Valuations tab > Exit modeling. For more information, visit our support site.

Updated Form 3921 Dashboard with Consolidated 3921 Statements (Company Tax & Compliance)

What's new?

After reviewing customer feedback, Carta made several user experience enhancements in the Form 3921 dashboard.

Carta now aggregates individual Form 3921’s for ISO exercises into consolidated statements for ease of use. Individual Copy B’s are still available to download if required. These statements will be available in participant portfolios when companies generate their 3921’s. 

The enhanced user experience also allows company stock administrators to download the Manage Stakeholder Details report to review all stakeholder records at once instead of in a paginated view within the Administrator Experience. Companies with 50+ stakeholders now have enhanced filter and sorting capabilities (e.g, select one or multiple years to download the Stakeholder details ledger) to better analyze historical data.

There is a new tab for “Exclude Transactions” for further flexibility if company administrators need to suppress reporting on individual option exercises. 

How does it work?

The new Form 3921 Dashboard is available now to all companies subscribed to this feature.

Reach out to Carta to get the process started

Reach out to your CSM to enable Form 3921 reporting if you are interested in upgrading your subscription. Public Market companies will have this enabled by default.


 

Introducing the ability to retract interests

Admins can now retract any interests that were issued incorrectly.

Ensure accuracy when issuing interests

Mistakes can happen when issuing interests, like inputting the incorrect contact information or interest details for the holder. 

Now, if you have already issued the interest but the holder has not accepted it yet, you can retract the interest. Retracting the interest revokes the holder’s task to accept it and changes the holder sharing status to ‘unshared’ so that you can make any corrections.

Get started

If you need to retract an interest, go to the interests ledger on the Interests & Interest Types page. Then, select the dropdown on the right side of the ledger for a single interest. Once you’ve made any corrections, be sure to re-share the interest with the holder as this does not happen automatically.

For more information, visit our support site.

New Acceptance Agreements tab

Admins can now easily add acceptance agreements before sharing the interest with the holder.

Easily manage acceptance agreements

It is now easier and more clear to add and gain visibility into acceptance agreements on interests. In the new Acceptance Agreements tab in an interest’s details, you can now select from the documents you’ve uploaded the ones you want the interest holder to sign when accepting the interest. Moving acceptance agreements into their own tab also makes it clear which documents a holder agreed to, or will agree to, during the acceptance of an interest. 

Get started

You can continue to upload files to the Documents tab. In the Acceptance Agreements tab, select from the uploaded documents the ones you want to add to the interest so that it is presented to the holder during the acceptance process. 

For more information, visit our support site.

New account dashboard page

The new account dashboard page provides an overview of all entities in one place.

Gain visibility across multiple entities

The new dashboard page provides a view into each entity and the recent activities so that you can always keep a pulse on what’s happening with interests across entities. Quickly learn more about recent activities by clicking into them.

Get started

Login to Carta to see the new account dashboard page.

Enhanced interest history

We’re excited to introduce enhancements to interest history which provide admins with a complete record of acceptance text, agreements, and signatures.

Streamline audits with a complete interest history

Admins can now access a detailed snapshot of the moment an Interest Holder accepts an interest , which includes:

  • The legal terms that the holder agreed to when accepting the interest
  • The legal documents that were attached to the interest when it was accepted, including the operating agreement or interest agreement
  • Date and time of when the holder signed and accepted the interest
  • Recipient signature and unique signature hash code generated at time of signature

Interest History Overview

Get started

Find these enhancements in the Interest History tab. For audits, export the interest to PDF by clicking “View as single page” from the interest detail. For more information, visit our support site.

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