Key Takeaways:
- A 1% excise tax on stock repurchases by publicly traded corporations, introduced by the Inflation Reduction Act of 2022, now requires reporting starting from taxable years ending after December 31, 2022.
- The final regulations clarify the due dates for Form 720 and Form 7208, and for tax years ending on or before June 28, 2024.
- Real estate investment trusts and regulated investment companies are exempt from filing if all stock repurchases qualify for statutory exceptions, and Form 7208 is unnecessary if no repurchases occur.
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The Treasury Department and the IRS released final regulations on June 28, 2024, providing guidance on the reporting of the corporate excise tax on stock repurchases by some publicly traded corporations. The 1% excise tax, introduced by the Inflation Reduction Act of 2022, generally applies to stock repurchases made after December 31, 2022.
Reporting Requirements
The final regulations largely adopt the proposed regulations. For taxable years ending on or before June 28, 2024, stock repurchase excise tax returns must be filed by October 31, 2024 (the due date for Form 720 for the third quarter of calendar year 2024). If a covered corporation has more than one taxable year ending after December 31, 2022, and on or before June 28, 2024, it should file a single Form 720 with a separate Form 7208 attached for each year. (Note that currently Form 7208 has been issued by the IRS only in draft form.)
Consistent with the proposed regulations, future stock repurchase excise tax returns must be filed by the due date of Form 720 for the first full calendar quarter after the end of the taxable year of the covered corporation. For example, a covered corporation with a tax year ending on December 31, 2024, must file its return by April 30, 2025 (the due date for a first-quarter Form 720).
The final regulations also exempt real estate investment trusts and regulated investment companies from filing requirements if all their stock repurchases fall within the statutory exception. Additionally, the final regulations clarify that a Form 7208 is not required if no repurchases or economically similar transactions occur during a tax year.
Corporate tax departments are under more pressure than ever to manage the complexities of today’s domestic and global tax landscape.
How MGO Can Help
Our tax team is well-equipped to help your publicly traded corporation navigate the complexities of the new stock repurchase excise tax regulations. With extensive experience in tax compliance, we can assist with timely and accurate filing of Form720 and 7208, as well as help you manage your reporting requirements, identify exemptions, and avoid potential compliance risks. Reach out to our team today to stay compliant with these new regulations.