IRS clarifies stock buyback deadline for fiscal year taxpayers

The IRS has announced (Announcement 2023-18) that no taxpayer will be required to report or pay the new excise tax imposed by Section 4501 on repurchases of corporate stock before the time specified in forthcoming regulations. The new tax took affect for repurchases after Dec. 31, 2022, and the new guidance is important for fiscal year taxpayers who could otherwise be required to report and pay the tax as early as July 31.

The IRS released initial guidance in December (Notice 2023-2) providing the expected procedures for reporting and paying any liability for the new excise tax (for more information on the excise tax and the initial guidance, see our prior story). Specifically, the notice states that the forthcoming regulations are expected to provide that the stock repurchase excise tax will be reported once per taxable year on the Form 720, Quarterly Federal Excise Tax Return, that is due for the first full quarter after the close of the taxpayer’s taxable year. The deadline for payment of the tax will be the same as the filing deadline, and no extensions will be permitted on the reporting or paying of the stock repurchase excise tax.

Grant Thornton Insight

Form 720 is a quarterly form that is due on the last day of the month following each calendar quarter (regardless of the tax year of the taxpayer). As an example, July 31 is the due date for the Form 720 that covers April through June. A fiscal year taxpayer with a year-end of June 30 could have been required to report and pay the stock buyback tax on a Form 720 by July 31 absent this transition relief.

Announcement 2023-18 clarifies the reporting and payment procedures for taxpayers with a taxable year ending after Dec. 31, 2022, but prior to the publication of the forthcoming regulations. The regulations are expected to provide that any liability for the stock repurchase excise tax will be reported on the Form 720 that is due for the first full quarter after the date of the publication of the forthcoming regulations, and that the deadline for payment of the stock repurchase excise tax will be the same as the filing deadline. The announcement provides there will be no addition to tax under Section 6651(a) (or any other provision) for failure to file a return, or failure to pay the stock repurchase excise tax, before the time specified in the forthcoming regulations.

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Jeff Borghino

Principal, Washington National Tax Office
Principal, Tax Services

Grant Thornton Advisors LLC

Jeff Borghino is a principal in the corporate tax group of Grant Thornton’s Washington National Tax Office in Washington, D.C. He focuses primarily on the taxation of corporate and financial transactions, including taxable and tax-free acquisitions, general corporate tax matters, recapitalizations and debt workouts, and financial instruments. Prior to joining the Washington National Tax Office, Borghino worked in Grant Thornton’s San Francisco office as part of the federal tax group.

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