# 409A Compliance MCP > US Section 409A Impact Calculator provides compliance checks for stock options. It helps you determine legal minimum strike prices, estimate tax penalties from non-compliant grants, and verify exercise window rules under US law. ## Overview - **Category:** finance - **Price:** Free - **Tags:** 409a, stock-options, compliance, tax-penalty, iso, nso ## Description This MCP handles the complicated math behind employee stock option compliance. If your company is issuing grants, understanding Section 409A isn't optional—it’s necessary to avoid massive unforeseen tax liabilities. Your agent can use this MCP to immediately determine if a proposed grant structure meets legal standards by running an audit with `analyze_grant_compliance`. It calculates the absolute lowest strike price allowed using `calculate_minimum_strike`, and it estimates the financial penalty you'd face if those rules are broken, thanks to `estimate_tax_penalty`. Furthermore, it provides clear guidance on tax implications and regulatory windows via `lookup_exercise_rules`. When your team needs this level of financial precision, Vinkius makes sure these critical tools are available right where you need them. ## Tools ### lookup_exercise_rules Provides specific regulatory information about option exercise windows and their tax consequences. ### analyze_grant_compliance Runs a full audit of proposed grants, checking them against current law and option type rules (ISO/NSO). ### calculate_minimum_strike Determines the lowest legally permissible strike price for an option grant. ### estimate_tax_penalty Calculates a financial estimate of the tax burden if options are granted below FMV. ## Prompt Examples **Prompt:** ``` What is the minimum strike price if my current FMV is $15.50? ``` **Response:** ``` Based on a current FMV of $15.50, the `calculate_minimum_strike` tool indicates that your minimum legal strike price is $15.50. ``` **Prompt:** ``` Calculate the penalty for a grant with a $12.00 strike price when FMV is $15.00. ``` **Response:** ``` Using `estimate_tax_penalty`, the taxable spread is $3.00, which triggers a 20% penalty plus applicable interest. ``` **Prompt:** ``` Check if a grant with a $14.00 strike price is compliant for an ISO at $15.00 FMV. ``` **Response:** ``` The `analyze_grant_compliance` tool identifies this grant as 'Non-Compliant' because the strike price is below the current FMV of $15.00. ``` ## Capabilities ### Check grant legality It audits proposed option grants against current Fair Market Value (FMV) and option type rules. ### Determine minimum strike price It calculates the lowest legally permissible strike price for any given stock option grant. ### Estimate tax liabilities It figures out the expected financial penalty if options are granted below FMV. ### Verify exercise timing rules It shows the regulatory window and associated tax implications for employees exercising their rights. ## Use Cases ### Structuring a New Employee Grant The HR Director needs to offer a senior engineer an option package. They ask their agent to run `analyze_grant_compliance` against the proposed strike price and FMV, instantly confirming that the grant is compliant for both ISO and NSO types. ### Reviewing Past Grants The VP of Finance wants to know what happens if they accidentally granted options below market value. They use `estimate_tax_penalty` to model the worst-case scenario, allowing them to correct processes before a problem hits. ### Setting Founder Incentives The CEO needs a legal minimum strike price for early hires. Using `calculate_minimum_strike`, they get the precise floor needed to ensure all future grants are legally structured and defensible. ## Benefits - Eliminate compliance risk before the grant goes out. Use `analyze_grant_compliance` to get an instant audit on any proposed option package. - Stop overpaying or under-structuring options. The MCP uses `calculate_minimum_strike` to give you the exact, lowest legal strike price floor. - Predict tax penalties instantly. Never guess about non-compliant grants again; just run a check with `estimate_tax_penalty` and see the actual financial hit. - Simplify complex rules. Need to know when employees can exercise? Use `lookup_exercise_rules` for clear, actionable guidance on regulatory windows. - Save hours of manual review. Instead of cross-referencing multiple IRS documents, your agent handles the entire compliance check in one go. ## How It Works The bottom line is you stop guessing about complex tax law and start working with verifiable numbers. 1. Input key variables like current Fair Market Value (FMV) and proposed strike price into your agent. 2. The MCP runs calculations against current IRS guidelines to check compliance, calculate minimum strikes, or model tax penalties. 3. You get a clear report detailing the legality of the grant, the exact penalty amount, and any necessary adjustments. ## Frequently Asked Questions **How do I check if my proposed grant is legal using analyze_grant_compliance?** You must provide the current FMV and the proposed strike price. The `analyze_grant_compliance` tool will then audit the proposal against both ISO and NSO requirements, telling you if it's compliant. **What is the minimum legal strike price? Use calculate_minimum_strike.** The `calculate_minimum_strike` function determines the absolute lowest price legally allowed. You just need to feed it the current Fair Market Value (FMV) for that calculation. **How do I estimate tax penalties with estimate_tax_penalty?** You run `estimate_tax_penalty` by specifying the grant's strike price and the actual FMV. The tool then calculates the exact taxable spread and expected penalty amount. **What does lookup_exercise_rules tell me about tax implications?** `lookup_exercise_rules` gives you specific details on when options can be exercised and what that means for taxes. It's essential for advising employees on timing. **How does `analyze_grant_compliance` account for different option types like NSO versus ISO?** It evaluates compliance by factoring in whether the grant qualifies as an Incentive Stock Option (ISO) or Non-Qualified Stock Option (NSO). The tool uses the specific type and current FMV to give a definitive pass/fail assessment against IRS guidelines. **If I provide incorrect data, what should I expect from `calculate_minimum_strike`?** The function requires an accurate Fair Market Value (FMV) for the strike price calculation. If you input invalid or contradictory financial data, it returns a specific validation error detailing which piece of market information needs correction. **To get the full picture, how should I sequence `analyze_grant_compliance` and `estimate_tax_penalty`?** First, use `analyze_grant_compliance` to confirm basic legal eligibility. Next, you run `estimate_tax_penalty` using the grant details to calculate the actual financial risk associated with any non-compliant elements. **Are there rate limits when calling `lookup_exercise_rules` repeatedly for different scenarios?** Vinkius manages usage, and repeated calls to `lookup_exercise_rules` are allowed within standard API thresholds. If your workflow requires high-volume testing, check the Vinkius dashboard for specific rate limit details. **How can I find the minimum strike price for a new grant?** Use the `calculate_minimum_strike` tool by providing the current Fair Market Value (FMV) and the valuation date. **What happens if I grant options below the FMV?** Granting below FMV triggers a 20% federal penalty tax plus interest. You can use `estimate_tax_penalty` to calculate the projected financial impact. **Does this tool cover ISO and NSO differences?** Yes. The `lookup_exercise_rules` tool provides specific exercise windows and tax summaries for both ISO and NSO types.