On December 27, 2022, the US Treasury Department and the Internal Revenue Service (“IRS”) issued Notice 2023-2 (the “Notice”), which provides taxpayers interim guidance (until regulations are issued) on how the new 1% excise tax on stock-buybacks will be imposed and administered. The new 1% excise tax was enacted last summer as part of the Inflation Reduction Act of 2022 and generally applies to any US corporation whose stock is traded on an established securities market and that repurchases more than $1 million of stock over the course of a tax year. Taxpayers may rely on the Notice pending the issuance of proposed regulations.
This Legal Update discusses the Notice’s clarification of “repurchases”; how acquisitions of certain foreign corporation stock will be treated; timing, fair market value and the qualifying property exception; the netting rule; reporting; examples provided of transactions that may or may not be subject to the stock repurchase excise tax; and specific areas on which comments are being solicited.
Read the complete Legal Update.