US Tax Newsroom

 Tax News Update    Email this document    Print this document  

August 8, 2022

Inflation Reduction Act revised to include excise tax on stock buybacks

  • Stock buyback excise tax provision is included in the Senate-passed Inflation Reduction Act and would apply to repurchases of stock after December 31, 2022.

The revised version of the Inflation Reduction Act (IRA) of 2022 (H.R. 5376) that was approved by the Senate on August 7, 2022, includes an excise tax that would impose a 1% surcharge on corporate stock buybacks. The bill is expected to be considered by the House of Representatives by the end of the week.

The stock buyback excise tax does not include significant substantive changes compared to the House-passed Build Back Better Act (see Tax Alert 2021-2033). However, the effective date has been changed to apply to repurchases of stock after December 31, 2022.

The provision would add a new IRC Section 4501, which would impose a 1% excise tax on publicly traded US corporations for the value of any of its stock that is repurchased by the corporation during the tax year.


The legislative text of proposed new IRC Section 4501 in the Inflation Reduction Act is substantially the same as what was included in earlier versions of the Build Back Better Act. However, its passage as part of the Inflation Reduction Act of 2022 now seems more likely. Accordingly, publicly traded corporations with stock repurchase programs should consider its potential application after December 31, 2022. In the absence of any further guidance regarding congressional intent or Treasury views, questions remain regarding the scope of transactions to which the new excise tax provision would apply, including certain divisive transactions under IRC Section 355, acquisitive reorganizations under IRC Section 368 with boot and "take private" transactions funded with the public target's debt.


Contact Information
For additional information concerning this Alert, please contact:
National Tax M&A Group - International Tax and Transaction Services
   • Donald Bakke (
   • Marc Countryman (
   • Shane Kiggen (

The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Ernst & Young LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact his or her Ernst & Young LLP or other tax professional prior to taking any action based upon this information. Ernst & Young LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.


Copyright © 1996 – 2022, Ernst & Young LLP


All rights reserved. No part of this document may be reproduced, retransmitted or otherwise redistributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, rekeying, or using any information storage and retrieval system, without written permission from Ernst & Young LLP.


EY US Tax News Update Master Agreement | EY Privacy Statement