Final regs. issued for 1% excise tax on corporate stock repurchases


Admin—

The IRS on Friday issued final regulations (T.D. 10002) on the Sec. 4501 1% excise tax on corporate stock repurchases enacted by the Inflation Reduction Act of 2022, P.L. 117-169. The final regulations provide rules on the procedure and administration applicable to the reporting and payment of the tax.


The regulations apply to publicly traded domestic corporations and certain publicly traded foreign corporations that repurchase their stock or whose stock is acquired by certain affiliates after Dec. 31, 2022.


The stock repurchase excise tax is required by the regulations to be reported on Form 720, Quarterly Federal Excise Tax Return, due for the first full calendar quarter after the end of the corporation's tax year, with Form 7208, Excise Tax on Repurchase of Corporate Stock, which is used to calculate the amount owed.


The final regulations change the proposed ones slightly in several ways. They:



  • Reserve Prop. Regs. Sec. 58.6011-1(c) until Prop. Regs. Sec. 58.4501-7(d)(2), dealing with special rules applicable to persons treated as a covered corporation (with respect to a covered surrogate foreign corporation), is finalized.

  • Revise Prop. Regs. Sec. 58.6011-1(a) to clarify that a stock repurchase excise tax return must be filed with respect to any tax year in which the covered corporation or person treated as a covered corporation makes a repurchase or is treated as making a repurchase.

  • Exempt regulated investment companies and real estate investment trusts from the obligation to file a stock repurchase excise tax return.


The final regulations also modify the applicability date. The regulations were proposed to apply to stock excise tax returns required to be filed after final regulations were published in the Federal Register and during tax years after that date. The final regulations change the applicability date to the date final regulations were filed with the Federal Register and during tax years after that date.


This "slight adjustment" was made "to facilitate the IRS's administration and enforcement of the stock repurchase excise tax and provide guidance to taxpayers as quickly as possible," the IRS said. The filing date for the final regulations was June 28, 2024.


Also that day, the IRS issued a separate set of proposed regulations (REG-115710-22) that would provide operating rules related to the computation of the stock repurchase excise tax. The IRS said it intends to finalize those proposed regulations in a separate Treasury decision after considering comments.


— To comment on this article or to suggest an idea for another article, contact Martha Waggoner at Martha.Waggoner@aicpa-cima.com.



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