IRS INDEFINITELY EXTENDS USE OF ELECTRONIC SIGNATURES FOR SECTION 83(B) ELECTIONS

On October 17, 2023, the U.S. Internal Revenue Service (IRS) updated its Internal Revenue Manual (IRM)^[1] to fully incorporate into the IRM certain e-signature policies and procedures permitting the use of electronic signatures on certain forms, including elections under section 83(b) of the Internal Revenue Code of 1986, as amended (the “Code,”^[2] and such elections, “Section 83(b) Elections”). This indefinitely extends the prior temporary relief granted by the IRS that was set to expire on October 31, 2023.

The IRS has historically required wet ink signatures for most tax documents, including Section 83(b) Elections.^[3] However, during the COVID-19 Pandemic, the IRS temporarily expanded the forms for which electronic signatures would be accepted.^[4] This temporary relief did not extend to Section 83(b) Elections until the IRS issued a memorandum on April 15, 2021 (the “April 2021 Memorandum”) that temporarily permitted electronic signatures on Section 83(b) Elections.^[5] The temporary relief provided by the April 2021 Memorandum was initially scheduled to expire on December 31, 2021, but the IRS later extended such relief until October 31, 2023 in a subsequent memorandum.^[6] Such relief is now indefinitely extended pursuant to the IRM.

The IRS’ electronic signature policy for Section 83(b) Elections and certain other specified tax forms^[7] provides that electronic and digital signatures may take various forms and can be created by different technologies. No specific technology is currently required for Section 83(b) Elections (though specific technologies may be required by the IRM in the future). Accordingly, acceptable forms of electronic signature for Section 83(b) Elections should include a name typed into a signature block, a scanned image of a handwritten signature or a signature created by third-party software (such as DocuSign).

Taxpayers should be aware that the updates to the IRM do not modify the other requirements in section 1.83-2 of the Treasury regulations for making Section 83(b) Elections, including the requirements that (i) the election be filed not later than 30 days after the date that the property that is the subject of the election was transferred and (ii) copies of the Section 83(b) Election be sent via certified mail to (A) the IRS office where the taxpayer files its tax return and (B) the person for whom the services are performed. Furthermore, taxpayers and their advisors should continue to consult the IRM in advance of future filings to ensure that the IRS has not changed its electronic signature policies for Section 83(b) Elections, including by requiring specific technologies.