Published by TaxNotes
The IRS and Treasury abandoned the embattled “funding rule” in final regulations implementing the 1 percent excise tax on stock buybacks and made welcome changes for reorganizations and preferred stock, tax advisers said. The final regulations (T.D. 10037) released November 21 take a different approach in several areas from the proposed regulations (REG-115710-22) issued in April 2024. The new rules will take effect November 24.
A&M's Mark Schneider underscores just how meaningful these changes are for corporations navigating acquisitive reorganizations. Schneider notes that, in the proposed regulations, taxpayers strongly pushed back on how M&A transactions were being swept into the buyback tax.
“The government ultimately concluded that the rule was better focused on ongoing, traditional stock buyback transactions, and not necessarily ones connected to a corporate life event,” Schneider said. “As a policy matter, it’s a reasonable outcome.”
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