The proposed regulations would provide guidance on the application of section 4981 of the Internal Revenue Code, which imposes an excise tax on certain stock repurchases by corporations. The regulations would clarify the definition of a stock repurchase and provide guidance on the calculation of the excise tax. They would also provide exceptions for certain repurchases, such as those made pursuant to a binding contract or for certain employee stock ownership plans.
The U.S. Treasury Department and IRS today released proposed regulations (REG- 115710-22) that would provide guidance on the new 1% excise tax on repurchases of corporate stock made after December 31, 2022, as well as proposed regulations (REG-118499-23) that would provide guidance regarding reporting and payment of the new excise tax.
Treasury and the IRS previously published Notice 2023-2 to provide initial guidance regarding the application of the stock repurchase excise tax (read TaxNewsFlash), and Notice 2023-2 is obsoleted for repurchases, issuances, and provisions of stock of a covered corporation occurring after April 12, 2024.
The proposed regulations providing general guidance on application of the new excise tax are proposed to generally apply to repurchases of stock of a covered corporation occurring after December 31, 2022, and during tax years ending after December 31, 2022, and to issuances and provisions of stock of a covered corporation occurring during tax years ending after December 31, 2022. However, certain proposed rules that were not described in Notice 2023-2 would apply to repurchases, issuances, or provisions of stock of a covered corporation occurring after April 12, 2024, and during tax years ending after April 12, 2024.
The proposed regulations providing guidance regarding reporting and payment of the new excise tax are proposed to apply to stock repurchase excise tax returns required to be filed after the date of publication of final regulations in the Federal Register.
Comments and requests for a public hearing on both sets of proposed regulations must be received by June 11, 2024.
Read a related IRS release—IR-2024-101 (April 9, 2024)
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