In April, the Treasury Department and the IRS published proposed regs on the 1% excise tax on stock buybacks imposed under the Inflation Reduction Act. As discussed in this comprehensive Cooley Alert, IRS Publishes Proposed Regulations on Stock Buyback Excise Tax, from our Comp & Benefits and Tax groups, the proposed regs take an expansive approach, applying the excise tax to transactions not typically considered stock buybacks, including redemptions and transactions that are economically similar to redemptions, such as exchanges of target stock in acquisitive reorganizations and other economically similar transactions. The Alert cautions that “companies may have excise tax liability or tax return filing obligations in myriad circumstances.”
As discussed in the Alert, under the proposed regs, the excise tax will apply to any domestic corporation with stock traded on an established securities market and even to some private companies for which stock price quotes are readily available. The Alert reviews the “general framework of the proposed regulations and key implications for M&A, capital markets offerings, foreign-parented groups, corporate distributions and liquidations, SPACs and compensatory transactions,” such as clawbacks. Be sure to check it out!
