Tax insight

Final stock repurchase excise tax regulations retroactively pare back rules

Insight
5 minute read
December 10, 2025

What happened?

Treasury and the IRS on November 24th published final regulations under Section 4501 (final regulations) regarding the stock repurchase excise tax (the excise tax), which was enacted as part of the Inflation Reduction Act of 2022. The final regulations remove or scale back many provisions that were included in the proposed regulations issued in 2024 (the proposed regulations) and that many practitioners and taxpayers had viewed as unduly burdensome or as giving the stock repurchase excise tax a broader reach than intended.

Why is it relevant?

Many foreign-parented multinationals were concerned that the broad language of the funding rule in the proposed regulations created uncertainty as to whether various ordinary course of business transactions with their US affiliates could result in the potential application of the excise tax. In addition, many US companies were concerned that the application of the excise tax to acquisitive reorganizations and leveraged buyouts as provided for in the proposed regulations could increase the cost associated with various M&A deals. The final regulations eliminate these provisions, which alleviates these concerns. The final regulations also address certain outstanding questions related to the application of netting for equity compensation, including rolling back a rule under the proposed regulations that did not permit netting for nonemployee service providers of specified affiliates of domestic covered corporations.

Actions to consider

The final regulations generally apply to (i) repurchases of stock of a covered corporation occurring after December 31, 2022, and (ii) issuances and provisions of stock of a covered corporation occurring during taxable years ending after December 31, 2022. Because the final regulations have retroactive effect, taxpayers that previously reported an amount due under the excise tax as a result of transactions that were described as subject to the excise tax under the proposed regulations, but are not subject to the excise tax or are subject to a lower amount of excise tax under the final regulations, should consider filing an amended return.