Stock repurchase excise tax reporting and payment delayed by IRS

The IRS provided relief regarding the new Sec. 4501 1% excise tax on the value of corporate share repurchases by a covered corporation during its tax year, saying Thursday in Announcement 2023-18 that taxpayers will not be required to report or pay the tax until the Service issues forthcoming regulations.

The tax was included in a new Sec. 4501 that was created by the Inflation Reduction Act, P.L. 117-169, which was signed into law in August 2022. The excise tax applies to repurchases of stock after Dec. 31, 2022 by covered corporations.

The IRS also said no addition to tax will be made under Sec. 6651(a) (or any other provision of the Code) when a corporation does not report the excise tax or does not pay it before the regulations are issued.

The forthcoming regulations will require covered corporations to keep complete and detailed records to establish accurately any amount of stock repurchases (including repurchases made after Dec. 31, 2022, but before the forthcoming regulations are published) and to retain these records for as long as their contents may become material.

The IRS in January published Notice 2023-2 to provide initial guidance regarding the application of the stock repurchase excise tax. The notice announced that Treasury and the IRS intend to issue forthcoming regulations addressing the application of the tax.

The notice also describes rules for determining the amount of the tax owed that Treasury and the IRS intend to include in the forthcoming regulations and provides that taxpayers may rely on these rules until the publication of the regulations.

— To comment on this article or to suggest an idea for another article, contact Martha Waggoner at Martha.Waggoner@aicpa-cima.com.