The IRS has announced that taxpayers will not be required to report the new Code Sec. 4501 excise tax on stock repurchases during a covered corporation’s tax year on any returns filed with the IRS, or to make such tax payments, before the time specified in the forthcoming regulations previously announced in Notice 2023-2, I.R.B. 2023-3, 374.
Moreover, there will be no addition to tax under Code Sec. 6651(a) or any other provision for failure to file a return reporting the stock repurchase excise tax, or for failure to pay the tax, before the time specified in the forthcoming regulations.
The forthcoming regulations also will require covered corporations to keep complete and detailed records to establish accurately any amount of stock repurchases (including repurchases made after 2022, but before the forthcoming regulations are published) and to retain these records as long as their contents may become material.
Notice 2023-2
The stock repurchase excise tax applies to repurchases made after 2022. The IRS has provided initial guidance on the excise tax in Notice 2023-2, which announces that the Treasury Department and the IRS intend to issue forthcoming regulations on the application of the stock repurchase excise tax. The guidance also describes certain rules for determining the excise tax amount and for reporting and paying the tax that are expected to be included in the forthcoming regulations. Taxpayers may rely on these rules until the publication of the forthcoming regulations.
Specifically, Notice 2023-2 provides that the forthcoming regulations are expected to provide that (i) the excise tax will be reported once per tax year on the Form 720, Quarterly Federal Excise Tax Return, that is due for the first full quarter after the close of the taxpayer’s tax year, (ii) the deadline for payment of the excise tax will be the same as the filing deadline, and (iii) no extensions will be permitted for reporting or paying the excise tax.
For those taxpayers with a tax year ending after 2022, but prior to publication of the forthcoming regulations, the regulations are expected to provide that any liability for the excise tax for such tax year will be reported on the Form 720 that is due for the first full quarter after the date of publication of the forthcoming regulations, and that the deadline for payment of the excise tax is the same as the filing deadline.
