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Learn how stock options, executive pay and other compensation could be part of your clients’ giving plans.

By Mariah Brook, Director of Gift Planning

Executive compensation comes in a variety of forms.

Even though executive compensation can rarely be given directly to nonprofits, it still offers an excellent opportunity to achieve charitable giving goals. Executive compensation or executive pay typically refers to financial and non-financial benefits received by an executive in exchange for their work.

If you have clients who receive executive compensation, such as stock options, restricted stock units (RSUs) or Restricted Stock Awards (RSAs), you may want to know how pairing them with a donor advised fund can both increase giving potential and minimize income taxation.

How Different Executive Compensation Giving Options Work

Stock options, RSAs and RSUs aren’t typically transferrable to a nonprofit, but after exercise or vesting the employee owns the actual shares of stock and can use them for charitable giving.

When donating executive compensation, it is usually best to wait at least a year after exercise or vesting so that the employee can receive a fair market value deduction for the gift and avoid capital gain on the donated shares.

See our quick reference guide on giving executive compensation below.

Stock Options

Stock options allow an employee to purchase company stock directly from the employer at a discounted price. That purchase of shares is called an exercise. Once options have vested, they can be exercised any time before their expiration date.

When an employee exercises stock options, they recognize ordinary income tax on the difference between the discounted option price and the value of the stock on the day of the exercise. That difference is called the spread.

If the employee sells the stock immediately, there is little to no capital gains tax to be recognized, because their basis is equal to or very close to the sale price. They will, however, still recognize ordinary income tax on the spread. A charitable gift of some of the sales proceeds could help to off-set that additional tax.

Restricted Stock Units (RSUs)

Restricted stock units (RSUs) allow an employee to receive a specific number of shares of company stock from the employer at a future date and sometimes after certain metrics have been met. At the time of vesting, the employee recognizes ordinary income tax on the stock's value.

If the employee sells the stock immediately upon vesting, there is little to no capital gains tax to be recognized because their basis is equal to or very close to the sale price. They will, however, still recognize ordinary income tax on the value of the stock they received. A charitable gift of some of the sales proceeds in the year of vesting could minimize that extra income tax.

Restricted Stock Awards (RSAs)

Restricted stock awards (RSAs) allow an employee to purchase shares of company stock directly from the employer on a specific date for fair market value, at a discount, or at no cost.

At the time of acquisition, the employee will recognize ordinary income tax on the difference between the purchase price and the fair market value (unless a Section 83(b) election was made). If the employee sells the stock immediately, a charitable gift of some of the sales proceeds could minimize that extra tax.

Executive Compensation Quick Reference Guide

Compensation Type

Tax Details

Charitable Deduction

Stock received after exercise of options

Ordinary Income Tax on FMV minus purchase price

FMV if held > 1 year

Stock received after RSUs vested

Ordinary Income Tax on value of stock on vest date

FMV if held > 1 year

Stock received after RSAs acquired

Ordinary Income Tax on FMV minus purchase price

FMV if held > 1 year

Pairing Executive Compensation with a Donor Advised Fund

After selling company stock, the employee may want to set aside some of the sale proceeds for future giving — perhaps in the years following retirement when their income isn’t as high. A contribution of cash to a donor advised fund allows them to receive a charitable deduction when it is most tax-advantageous and keep those dollars set aside for future giving.

The employee may want to support their favorite causes with a gift of the company stock. Some nonprofit organizations accept both publicly traded and privately held stock, while some don’t. A donor advised fund can accept both and liquidate tax-free, making the proceeds available to grant to their favorite nonprofits now or in the future. One gift of stock can be used to support multiple organizations easily and efficiently.

Furthermore, if an employee expects to exercise more stock options or receive more stock from RSUs or RSAs in the future, their donor advised fund will be there to accept more gifts of stock and/or cash at any time.

As always, our team of experienced gift planners are available to work with you and your clients to craft a gift that is just right for them. To contact a gift planner, call 651.244.5463 or email us at philanthropy@spmcf.org.

The Saint Paul & Minnesota Foundation does not provide tax, legal or accounting advice. Please consult your own tax, legal and accounting advisors regarding your individual situation before engaging in any transaction.


As Director of Gift Planning at the Saint Paul & Minnesota Foundation, Mariah Brook helps individuals and families initiate and express their philanthropic plan to maximize their giving. In her role, Mariah also provides nonprofits the support to start and grow their endowments and works alongside professional advisors to help them achieve their client’s philanthropic goals.

Mariah joined the Foundation in 2014 after graduating from the University of Minnesota with a bachelor’s degree in communication studies. A Midwesterner at heart, she loves exploring the people, places and things that make Minnesota home.

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