On March 31, 2015, IRS issued final regulations clarifying that stock options and SARs will only qualify as performance-based compensation if granted under a stockholder-approved plan that includes an individual limit on the number of such awards that may be granted during a specified period. In addition, only certain types of stock-based compensation are eligible to be treated as “paid” when granted for purposes of qualifying for an exemption under the IPO transition rule.
For more information about structuring individual limits for equity grants, please see this article in The Corporate Executive.