'Can't Get [Much] Satisfaction' From Proposed Stock Repurchase Rules

On April 9, 2024, Treasury and the IRS released proposed regulations for the excise tax on stock repurchases, which closely align with the interim guidance in Notice 2023-2 (the Notice). The government has opted to base the application of the excise tax on established U.S. federal income tax principles, which are at times highly fact dependent, declining to take advantage of the broad grant of regulatory authority to create more intuitive and administrable rules. This is particularly noticeable in cases that do not implicate the purported policy objectives of the excise tax. However, the proposed regulations do offer some helpful clarifications and as expected, revise the widely criticized rule in the Notice that automatically assumed certain stock repurchases of a foreign corporation are funded by U.S. sources, and therefore subject to the excise tax (the per se rule).