§Why CasetextPricing

Excise Tax on Repurchase of Corporate Stock

89 Fed. Reg. 25980 (Apr. 12, 2024)

2 Analyses of this federal-register by attorneys

  1. IRS Publishes Proposed Regulations on Stock Buyback Excise Tax

    Cooley LLPPatrick SharmaMay 1, 2024

    On April 12, 2024, the US Department of the Treasury and the IRS published proposed regulations (89 FR 25980 and 89 FR 25829, the “Proposed Regulations”) on the application of Section 4501,1 which imposes a 1% excise tax2 on certain repurchases of stock of publicly traded US corporations (the “Excise Tax”). The Proposed Regulations generally follow the same approach as the interim guidance under Notice 2023-2 (the “Notice”), which was summarized in this January 2023 Cooley M&A publication.3 Like the Notice, the Proposed Regulations generally would apply to stock repurchases occurring after December 31, 2022, and stock issuances during taxable years ending after December 31, 2022, except that certain specific rules not addressed in prior guidance would be effective only for transactions after April 12, 2024, the publication date of the Proposed Regulations.The Proposed Regulations adopt a broad approach to application of the Excise Tax, with limited exceptions. As a result, the Excise Tax applies to transactions that are not conventionally regarded as stock buybacks, and companies may have Ex

  2. Newly Proposed Regulations on Stock Buyback Excise Tax Largely Adopt Approach From Initial IRS Guidance

    Skadden, Arps, Slate, Meagher & Flom LLPThomas WoodApril 18, 2024

    On April 12, 2024, the Treasury Department (Treasury) and Internal Revenue Service (IRS) issued proposed regulations (89 FR 25980 and 89 FR 25829) on the excise tax on stock buybacks enacted as part of the Inflation Reduction Act of 2022. The excise tax generally applies to “repurchases” of stock by publicly-traded corporations after December 31, 2022. The tax imposed is generally equal to 1% of the fair market value of the repurchased stock (determined based on a “shares in, shares out” approach that nets repurchases and issuances of stock within the same taxable year). However, under President Biden’s Fiscal Year 2025 Budget Proposal (FY 2025 Budget Proposal), the rate would increase to 4%.The proposed regulations contain detailed operative rules as well as administrative rules related to the reporting and payment of the excise tax. They generally follow the approach laid out in prior interim guidance issued by Treasury and the IRS in Notice 2023-2 (Notice). Both the Notice and the proposed regulations endorse a broad application of the excise tax, including (as many commentators pointed out in response to the