New Stock Buyback Tax: Some Questions Answered, Others Remain

New Stock Buyback Tax: Some Questions Answered, Others Remain

Client Alert

One of the headline tax changes in the Inflation Reduction Act of 2022, Public Law 117-169, is a 1% excise tax on stock repurchases by public companies. New Section 4501 of the Internal Revenue Code applies a non-deductible 1% excise tax to the fair market value of net stock repurchases by certain publicly traded corporations that take place after December 31, 2022. As we described in our previous client alert, Surprises and Questions Around the New Stock Buyback Tax, after the new law’s enactment, there were many questions regarding the application of the excise tax to certain common transactions, such as tax-free reorganizations and liquidations. In late December, the Treasury Department issued Notice 2023-2, which addresses some of these questions, but others remain unanswered.

In general, the Notice takes a technical approach to interpretation of the statute and does not interpret the statute by applying the principles underlying the purpose of the excise tax. As a result, the Notice makes clear that the excise tax under Section 4501 is not limited to traditional stock buybacks by public companies. Our alert summarizes significant points addressed in the Notice that we think will be of particular interest to our clients. Our tax specialists are available to evaluate and to advise on the potential application of this tax to any transaction involving the purchase, exchange or transfer of public company stock.

Read the full alert.



Unless you are an existing client, before communicating with WilmerHale by e-mail (or otherwise), please read the Disclaimer referenced by this link.(The Disclaimer is also accessible from the opening of this website). As noted therein, until you have received from us a written statement that we represent you in a particular manner (an "engagement letter") you should not send to us any confidential information about any such matter. After we have undertaken representation of you concerning a matter, you will be our client, and we may thereafter exchange confidential information freely.

Thank you for your interest in WilmerHale.