Corporate Stock Buyback Tax Reporting Rules

Summary

This document contains final regulations that provide guidance regarding the reporting and payment of the excise tax on repurchases of corporate stock made after December 31, 2022. The regulations affect certain publicly traded corporations that repurchase their stock or whose stock is acquired by certain specified affiliates.

Compliance Requirements

1. #1

   Any covered corporation (as defined in section 4501(b) of the Internal Revenue Code (Code)), or any person treated as a covered corporation (as described in section 4501(d)(1)(A) or (d)(2)(A)), that makes a repurchase (as defined in section 4501(c)(1)), or that is treated as making a repurchase under section 4501(c)(2)(A), (d)(1)(B), or (d)(2)(B), must keep such complete and detailed records as are sufficient to establish accurately the amount of repurchases, adjustments, or exceptions required to be shown by the covered corporation or person treated as a covered corporation in any stock repurchase excise tax return (as defined in §58.6011-1(b)).; The records required by this section must be kept at all times available for inspection by the IRS and must be retained for so long as the contents thereof may become material in the administration of any internal revenue law.; Any covered corporation (as defined in section 4501(b) of the Internal Revenue Code (Code)), or any person treated as a covered corporation (as described in section 4501(d)(1)(A) or (d)(2)(A)), other than a regulated investment company (as defined in section 851 of the Code) or a real estate investment trust (as defined in section 856(a) of the Code), that makes a repurchase (as defined in section 4501(c)(1)), or that is treated as making a repurchase under section 4501(c)(2)(A), (d)(1)(B), or (d)(2)(B), after December 31, 2022, must file a stock repurchase excise tax return with respect to any taxable year in which the covered corporation or person treated as a covered corporation makes a repurchase or is treated as making a repurchase under section 4501(c)(2)(A), (d)(1)(B), or (d)(2)(B).; A stock repurchase excise tax return required by §58.6011-1(a) must be filed by the due date of the Form 720, Quarterly Federal Excise Tax Return, that is for the first full calendar quarter after the end of the taxable year of the covered corporation (as defined in section 4501(b) of the Internal Revenue Code (Code)), or person treated as a covered corporation (as described in section 4501(d)(1)(A) or (d)(2)(A)).; Any stock repurchase excise tax return (as defined in §58.6011-1(b)), statement, or other document required to be made with respect to the tax imposed by chapter 37 of the Internal Revenue Code must be signed by the person required to file the return, statement, or other document, or by the persons required or duly authorized to sign in accordance with the regulations, forms, or instructions prescribed with respect to such return, statement, or document.; If either a stock repurchase excise tax return (as defined in §58.6011-1(b)), statement, or other document made with respect to any tax imposed by chapter 37 of the Internal Revenue Code, or the related form and instructions, requires that such return, statement, or other document contain or be verified by a written declaration that it is made under the penalties of perjury, then it must be so verified by the person or persons required to sign such return, statement, or other document.; A person that engages or employs one or more signing tax return preparers (as defined in §301.7701-15(b)(1) of this chapter) to prepare a stock repurchase excise tax return (as defined in §58.6011-1(b)) or claim for refund of tax under chapter 37 of the Internal Revenue Code, other than for the person, at any time during a return period, must satisfy the recordkeeping and inspection requirements in the manner stated in §1.6060-1 of this chapter.; The stock repurchase excise tax must be reported on IRS Form 720, Quarterly Federal Excise Tax Return, with an attached Form 7208, Excise Tax on Repurchase of Corporate Stock, or any other forms, schedules, or statements prescribed by the Commissioner for the purpose of making a return to report the tax under chapter 37 of the Code.; The deadline for payment of the stock repurchase excise tax is the same as the filing deadline, and no extensions are permitted for reporting or paying the stock repurchase excise tax.

Market Impacts

• Imposition of 1% excise tax on stock repurchases by covered corporations, creating a direct financial disincentive for stock buyback activities; New regulatory compliance requirements including Form 7208 filing obligations and detailed recordkeeping create administrative barriers to stock repurchase activities; Special rules apply to covered surrogate foreign corporations and their U.S. affiliates, creating additional compliance requirements for foreign entities with U.S. operations; Creates new market opportunity for tax return preparers and compliance consultants specializing in stock repurchase excise tax reporting and compliance; RICs and REITs are exempt from filing Form 7208 but remain subject to recordkeeping requirements, creating regulatory distinction from other corporations

Validated Company Impacts