On April 12, 2024, Treasury and the IRS published proposed regulations on the 1% excise tax imposed by Internal Revenue Code Section 4501 on the value of stock repurchased by a US public corporation or a 50% affiliate. The proposed regulations elaborate on and clarify compensation-related issues that arose in Notice 2023-2, December 27, 2022 (addressed in our prior blog post), including:
- how to value repurchased stock for purposes of calculating the amount subject to the excise tax;
- when a clawback or forfeiture of stock from an employee is considered a repurchase for excise tax purposes; and
- the extent to which the tax base for the excise tax may be reduced by the value of stock issued or provided to employees/service providers through various types of equity compensation awards or by the value of stock contributed to an employer-sponsored retirement plan.
For a full discussion of these topics and practical tips on next steps, we are happy to share our recent alert.