IRS finalizes stock buyback tax regulations

The Fiscal Service and the Treasury Department published final regulations how companies and tax advisors should report and pay the 1% excise tax on corporate share buybacks under the Inflation Control Act.

The 2022 Act imposed a new excise tax on stock repurchases equal to 1% of the aggregate fair value of shares repurchased by certain corporations during the taxable year, subject to adjustments. Excise tax on share repurchases applies to repurchases after December 31, 2022.

The final regulations, issued Friday, require excise taxes on stock repurchases to be reported Form 720A quarterly federal excise tax return, required for the first full calendar quarter after the end of the corporation’s fiscal year, Form 7208, Excise tax on the purchase of corporate shares, attached. Form 7208 is used to calculate the amount of excise tax due on stock repurchases.

Andrew Harrer/Bloomberg

Forms 720 and 7208 that are due for tax years ending after December 31, 2022 through June 30, 2024, must be submitted by the third quarter Form 720 due date of October 31, 2024.

If a corporation has more than one taxable year ending after December 31, 2022, but on or before June 30, 2024, it should file one Form 720 with two separate Forms 7208 (one for each taxable year) filed by October 31, 2024.

The final regulations affect domestic publicly traded corporations that repurchase their shares or whose shares are acquired by certain affiliates after December 31, 2022. The regulations also affect certain foreign publicly traded corporations that repurchase their shares or whose shares are acquired by certain affiliates after December 31, 2022. acquired by certain affiliates after December 31, 2022. 31/2022.