In brief

What happened?

Treasury and the IRS on June 28 released final regulations (TD 10002; RIN 1545-BQ60) concerning the reporting and payment of the section 4501 excise tax on repurchases of corporate stock (final procedural regulations).

Why is it relevant?

The final procedural regulations address the procedural rules around the filing of the Form 720, Quarterly Federal Excise Tax Return, and Form 7208, Excise Tax on Repurchase of Corporate Stock, and the payment of the related excise tax. They also indicate that RICs and REITs do not have to file a Form 7208 but do have to maintain records.

Action to consider:

Taxpayers that are publicly traded corporations (or that are specified affiliates of foreign publicly traded corporations) need to prepare for any filing and payment obligations that will be due on October 31, 2024. 

Reporting and payment of the excise tax

The excise tax generally must be reported and paid with the Form 720 for the first full calendar quarter after the end of the tax year of the covered corporation or person treated as a covered corporation (the taxpayer). Therefore, a calendar-year taxpayer’s deadline generally would be April 30 of the following year. 

In June 2023, the IRS announced that no taxpayer would be required to report or pay the excise tax until guidance was provided in forthcoming regulations. The proposed procedural regulations released in April 2024 clarified that, for tax years that ended before the final excise tax regulations were published in the Federal Register, taxpayers would not be required to report or pay the excise tax until the deadline for the Form 720 for the first full calendar quarter after the final regulations were published.

Under the final procedural regulations, for a taxpayer with a taxable year ending after December 31, 2022, and on or before June 28, 2024, the due date for the first payment of the excise tax and the filing of the Form 7208 is October 31, 2024.  This due date is now based on the date these final procedural regulations were filed with the Federal Register and even though the substantive regulations have yet to be finalized. 

The final procedural regulations, like the proposed procedural regulations, require a return for a taxable year even if a taxpayer has no excise tax liability due to exceptions or issuances that exceed repurchases made during its taxable year.

Observation: The proposed procedural regulations stated that the initial due date for payments and returns would be based on when final regulations were published by the Federal Register. The final procedural regulations have changed this to indicate that the due date is based on the date the final procedural regulations are filed with the Federal Register. The use of the “filed with” date (i.e., June 28) as opposed to the “published by” date (which will not be earlier than July 1) has the effect of moving the due date for first payments and returns forward by 3 months. A draft version of Form 7208 and the instructions for the draft Form 7208 are available on the IRS website.  While the drafts will need to be finalized, it may be useful to review the proposed reporting requirements.

Observation: The final procedural regulations released on June 28 indicate that the initial filing due date of October 31, 2024, applies to a taxpayer having a taxable year ending on or before June 28, while an IRS press release instead indicates taxable years ending on or before June 30. It is expected that the published Federal Register final procedural regulations will clarify this discrepancy.

See also

• Tax Insight: Proposed regulations clarify application of the excise tax on stock repurchases (April 2024)
• Tax Insight: IRS delays filing and payment obligations for excise tax on stock repurchases (June 2023)
• Tax Insight: Initial guidance from Treasury on stock repurchase provisions (January 2023)