The IRS has issued proposed regulations (REG-115710-12, RIN 1545-BQ59 and REG-118499-23, RIN 1545-BQ60), which would implement the 1% excise tax on corporate stock repurchases enacted by Congress under the Inflation Reduction Act (IRA).
The proposed regulations are derived from - and once finalized would replace - interim guidance issued by the IRS in December 2022.
The excise tax will apply to stock repurchases that occur after 31 December 2023 and is based on the aggregate fair market values of the stock.
Under the proposed regulations, a statutory netting principle is implemented, in which the total fair market value of the stock issued by a taxpayer in a fiscal year is deducted from the total fair market value of the stock that the same taxpayer repurchased in that year.
The regulations would also implement a statutory de minimis exception, which exempts a taxpayer from the stock repurchase excise tax for a fiscal year if the total fair market value of the stock that the taxpayer repurchased in that year is not more than USD 1,000,000.
Source: IBFD tax research platform news