AICPA weighs in on excise tax for repurchased corporate stock.

TLDR:

• AICPA comments on Proposed Regs on Excise Tax on Repurchase of Corporate Stock
• Section 4501(a) imposes a 1% tax on the fair market value of stock repurchased by a corporation

The American Institute of CPAs (AICPA) has submitted comments to the Department of the Treasury and the IRS regarding the excise tax on repurchase of corporate stock proposed regulations. The proposed regulations address the application of the new excise tax on repurchases of corporate stock under section 4501, which imposes a 1% tax on the fair market value of any stock of the corporation that is repurchased during the taxable year.

One of the key issues raised in the comment letter is the Per Se Rule in the Proposed Regs, which the AICPA requests to be revoked. The AICPA also asks for clarification and limitation of the application of the Funding Rule to fundings made solely to avoid the excise tax under section 4501(d).

The comment letter further delves into the concerns with the “principal purpose” test in the proposed regulations, emphasizing the need to consider all facts and circumstances in determining whether a transaction’s principal purpose is to avoid the excise tax. The AICPA highlights the importance of taking into account the full context of a transaction before determining its purpose.

Overall, the AICPA’s comments on the proposed regulations aim to address concerns related to the application and interpretation of the excise tax on the repurchase of corporate stock, with a focus on ensuring clarity and fairness in the implementation of section 4501.