An 83(b) election is a provision in the United States tax code that allows a person who receives restricted stock or other property subject to vesting to include the value of that property in their taxable income at the time it is received, rather than when it vests. This election is named after Section 83(b) of the Internal Revenue Code.

Here’s how the 83(b) election generally works:

1. **Restricted Stock Grant:** When an employee or other service provider is granted restricted stock or other property that is subject to vesting (meaning it becomes fully owned by the recipient over time), the value of the property is not immediately taxable.

2. **Vesting Schedule:** The property typically becomes taxable as it vests over time according to a vesting schedule. At each vesting date, the value of the property is included in the individual’s taxable income.

3. **83(b) Election:** Instead of waiting for each vesting date to recognize the income, the recipient can make an 83(b) election with the IRS within 30 days of receiving the property. By making this election, the individual agrees to include the current value of the property in their taxable income in the year of receipt, even if it has not yet vested.

4. **Tax Consequences:** The tax consequence of making an 83(b) election is that the individual may pay taxes on the property’s value upfront, potentially at a lower tax rate. If the property appreciates in value over time, any subsequent gains may be subject to capital gains tax when the property is eventually sold.

It’s important to note that making an 83(b) election involves some level of risk. If the property ultimately doesn’t vest (for example, if the individual leaves the company before full vesting), the tax paid upfront may not be recoverable, and the individual would not receive the full benefit of the original tax payment.

Individuals considering an 83(b) election should seek advice from a tax professional to fully understand the implications and whether it is the right strategy based on their specific circumstances. The election must be filed with the IRS within the prescribed timeframe, and failure to do so can result in adverse tax consequences.