The IRS finalized regulations for the 1% excise tax on corporate stock repurchases under Sec. 4501 — and one heavily criticized proposed provision is gone.
The final rules (T.D. 10037) eliminate the so-called “funding rule,” which could have triggered the tax when a U.S. subsidiary helps its foreign parent finance a buyback.
Commenters argued the rule was vague and could apply to routine transactions, making compliance costly and uncertain.
The final regulations also removed a proposed “no double benefit” item that would have disregarded certain reorganization and distribution transactions for purposes of the netting rule under Sec. 4501(c)(3). Learn more.