Legal Alert: Inflation Reduction Act imposes a nondeductible 1% excise tax on certain corporate stock buybacks

On August 16, 2022, President Biden signed the Inflation Reduction Act of 2022 (the IRA) into law. Among the provisions of the IRA is a nondeductible 1% excise tax on the repurchase of corporate stock (the Buyback Tax). The Buyback Tax is directly levied on repurchasing corporations, which means that corporations that currently have, or are considering, the adoption of stock buyback programs will need to include the Buyback Tax in the evaluation of the costs of any such program. Not all stock buybacks are covered by the tax, and there are a number of exceptions that may apply to limit the impact of the Buyback Tax, as discussed in more our legal alert. The Buyback Tax is effective for transactions occurring in taxable years after December 31, 2022.

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