Treasury and the IRS have released final regulations on the 1% excise tax on the value of stock repurchased by publicly traded corporations. The final regs, which are effective November 24, 2025, clarify the tax’s application, scale back application to corporations engaging in acquisitive reorganizations, and withdraw the “funding rule” that would have impacted foreign corporation affiliates. (T.D. 10037, 11/21/2025)
Background
The 2022 Inflation Reduction Act added IRC § 4501 to impose a new excise tax on certain stock repurchases. The excise tax is equal to 1% of the aggregate fair market value of stock repurchased by certain corporations during the tax year. The excise tax applies to repurchases after December 31, 2022. Covered corporations include domestic corporations for which stock is traded on an established securities market.
The IRS proposed computational and procedural regulations related to the corporate stock repurchase excise tax in April 2024. The agency finalized the procedural regulations in July 2024, providing clarity on how to report and pay the excise tax.
The IRS, however, held off on finalizing the computational regulations after receiving negative comments from stakeholders. Commenters argued that portions of the proposed regs were ambiguous and could cause the tax to be applied to long-standing, normal-course corporate transactions. In light of the Supreme Court’s decision in Loper Bright Enterprises v. Raimondo, commenters also contended the proposed regs do not reflect “the best interpretation of the statutory text.”