Final Buyback Regs Are Good News for M&A Transactions, Too

Tax attorney Joshua Odintz was quoted in a Tax Notes article about a final rule from the IRS and U.S. Department of the Treasury implementing a 1 percent excise tax on stock buybacks and how it differs from the proposed rule issued in April 2024. The final regulations are narrower in scope than the version initially proposed, focusing on transactions that are economically similar to traditional stock buybacks. One of the most notable changes is the omission of a "funding rule" that would have applied the tax to certain purchases of foreign parent stock funded by a U.S. subsidiary if the government determined the primary purpose for said funding was tax avoidance. Referencing the U.S. Supreme Court's 2024 decision overturning Chevron deference, Mr. Odintz said this was the right move.

"Applying the Loper Bright standard for interpretation, the best reading of the statute is that there was not a funding rule built in and so this is clearly the correct statutory approach," he explained, adding that removing the rule also "makes the administration of the tax relatively straightforward."

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