Share repurchase tax: Q&As

The Inflation Reduction Act (IRA) was signed into law in August 2022. Among other things, it imposes a 1% excise tax on net share repurchases in a tax year that are made by certain publicly traded corporations. We explain the accounting treatment for the new excise tax using Q&As reflecting issues encountered in practice since the IRA was signed into law.

Applicability

• Publicly-traded corporations that are subject to the new 1% excise tax on net repurchases of their own shares

Key impacts

Companies will generally account for the excise tax as a direct cost of a share repurchase transaction. It is appropriate to recognize the direct cost in the period of a repurchase and subsequently adjust the cost for any reductions in the period that includes a share issuance. Repurchase accounting depends on the repurchased share’s balance sheet classification. It is appropriate to classify excise tax paid in line with the nature of the transaction in the statement of cash flows.

Report contents

• Overview
• Questions and answers