Funding the Flames: Why Foreign Multinationals Must Take Stock of the Stock Buyback Excise Tax

On April 9, 2024, the Treasury released proposed regulations for the stock buyback excise tax under section 4501. The proposed regulations address the application of the stock buyback excise tax to certain repurchases of publicly traded stock of foreign-parented groups that differ from those contemplated by Notice 2023-2, including (i) changes to the funding rule, which can apply when a U.S. subsidiary funds the repurchase of foreign parent stock by the foreign parent or foreign subsidiaries of the group, and (ii) the removal of the per se rule, which deemed a principal purpose to avoid the stock buyback excise tax to exist when there was a funding by any means (other than through a distribution) within two years of a repurchase of foreign parent stock.

How can the stock buyback excise tax apply to foreign-parented multinationals and how do the proposed regulations change that application? How would the proposed regulations both broaden and narrow the application of the funding rule? What should foreign multinationals be doing now in reaction to these regulations?

Join us as our podcast co-hosts Gary Scanlon and Kristen Gamboa are joined by guests Maury Passman and Tim Nichols from the KPMG WNT Corporate group to explore these issues and more on the latest episode of Inside International Tax.