Stock Repurchase Excise Tax Regulations Finalized: Effect on RICs

On June 28, 2024, the U.S. Department of the Treasury and the Internal Revenue Service issued final regulations on the reporting of the one-percent (1%) stock repurchase excise tax imposed by new section 4501 of the Internal Revenue Code on a corporation’s net redemptions made during the taxable year.

The final regulations exempt regulated investment companies (“RICs”) from an annual excise tax return filing obligation. This is an important change from the proposed regulations, which would have imposed a filing obligation on RICs even though RICs are otherwise exempt under section 4501 from the excise tax.

RICs will be subject to the recordkeeping requirement on the basis that the records could be relevant in case of loss of RIC status.
This set of final regulations does not provide any exemption from the stock repurchase excise tax for non-RIC funds registered under the Investment Company Act of 1940.

The effective date of these final regulations was June 28, 2024.