The IRS has removed a controversial rule in a new regulation implementing a 1% excise tax on certain types of stock repurchases after the American Bankers Association and others raised concerns that the language was too broad.
The Treasury Department last year proposed a set of rules to implement provisions of the Inflation Reduction Act, which was passed by Congress in 2022 and, among its many changes, enacted the excise tax on stock buybacks. In a letter to the IRS, ABA said the proposal’s funding rule was particularly problematic because it would apply the tax to the repurchase of stock of foreign corporations with U.S. affiliates under several circumstances. The association urged the agency to remove the rule.
In a final version of the regulation to be published Monday, the IRS said it received many comments on the funding rule, some in support but several citing concerns about the compliance burden and lack of clarity on its application. “Taking into account all comments, these final regulations do not adopt the proposed funding rule,” the agency said.
