# Bulletin No. 2024–20

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## Record

- **Collection:** Agency decision
- **Document type:** Agency decision

## Text

HIGHLIGHTS
OF THIS ISSUE




Bulletin No. 2024–20
May 13, 2024

These synopses are intended only as aids to the reader in
identifying the subject matter covered. They may not be
relied upon as authoritative interpretations.

EXCISE TAX
REG-115710-22, page 1070.

These proposed regulations provide guidance addressing
the application of the stock repurchase excise tax added to
section 4501 of the Internal Revenue Code by the enactment
of Public Law 117-169, 136 Stat. 1818 (August 16, 2022),
commonly referred to as the Inflation Reduction Act of 2022.
The proposed regulations in REG-115710-22 contain operative rules that provide taxpayers with guidance on how to
calculate the amount of stock repurchase excise tax owed.

Finding Lists begin on page ii.

REG-118499-23, page 1167.

These proposed regulations provide guidance addressing
the application of the stock repurchase excise tax added to
section 4501 of the Internal Revenue Code by the enactment
of Public Law 117-169, 136 Stat. 1818 (August 16, 2022),
commonly referred to as the Inflation Reduction Act of 2022.
The proposed regulations in REG-118499-23 provide procedural rules that prescribe the manner of reporting and paying
the stock repurchase excise tax.

The IRS Mission
Provide America’s taxpayers top-quality service by helping
them understand and meet their tax responsibilities and
enforce the law with integrity and fairness to all.

Introduction
The Internal Revenue Bulletin is the authoritative instrument
of the Commissioner of Internal Revenue for announcing official rulings and procedures of the Internal Revenue Service
and for publishing Treasury Decisions, Executive Orders, Tax
Conventions, legislation, court decisions, and other items of
general interest. It is published weekly.
It is the policy of the Service to publish in the Bulletin all substantive rulings necessary to promote a uniform application
of the tax laws, including all rulings that supersede, revoke,
modify, or amend any of those previously published in the
Bulletin. All published rulings apply retroactively unless otherwise indicated. Procedures relating solely to matters of internal management are not published; however, statements of
internal practices and procedures that affect the rights and
duties of taxpayers are published.
Revenue rulings represent the conclusions of the Service
on the application of the law to the pivotal facts stated in
the revenue ruling. In those based on positions taken in rulings to taxpayers or technical advice to Service field offices,
identifying details and information of a confidential nature are
deleted to prevent unwarranted invasions of privacy and to
comply with statutory requirements.
Rulings and procedures reported in the Bulletin do not have the
force and effect of Treasury Department Regulations, but they
may be used as precedents. Unpublished rulings will not be
relied on, used, or cited as precedents by Service personnel in
the disposition of other cases. In applying published rulings and
procedures, the effect of subsequent legislation, regulations,
court decisions, rulings, and procedures must be considered,
and Service personnel and others concerned are cautioned

against reaching the same conclusions in other cases unless
the facts and circumstances are substantially the same.
The Bulletin is divided into four parts as follows:
Part I.—1986 Code.
This part includes rulings and decisions based on provisions
of the Internal Revenue Code of 1986.
Part II.—Treaties and Tax Legislation.
This part is divided into two subparts as follows: Subpart A,
Tax Conventions and Other Related Items, and Subpart B,
Legislation and Related Committee Reports.
Part III.—Administrative, Procedural, and Miscellaneous.
To the extent practicable, pertinent cross references to these
subjects are contained in the other Parts and Subparts. Also
included in this part are Bank Secrecy Act Administrative
Rulings. Bank Secrecy Act Administrative Rulings are issued
by the Department of the Treasury’s Office of the Assistant
Secretary (Enforcement).
Part IV.—Items of General Interest.
This part includes notices of proposed rulemakings, disbarment and suspension lists, and announcements.
The last Bulletin for each month includes a cumulative index
for the matters published during the preceding months. These
monthly indexes are cumulated on a semiannual basis, and are
published in the last Bulletin of each semiannual period.

The contents of this publication are not copyrighted and may be reprinted freely. A citation of the Internal Revenue Bulletin as the source would be appropriate.

May 13, 2024 

Bulletin No. 2024–20

Part IV
Excise Tax on Repurchase
of Corporate Stock
REG-115710-22
AGENCY: Internal Revenue Service
(IRS), Treasury.
ACTION: Notice of proposed rulemaking.
SUMMARY: This document contains
proposed regulations that would provide
guidance regarding the application of the
new excise tax on repurchases of corporate stock made after December 31, 2022.
The proposed regulations would affect
certain publicly traded corporations that
repurchase their stock or whose stock is
acquired by certain specified affiliates.
Another notice of proposed rulemaking
(REG-118499-23) on this topic is published in the Proposed Rules section of
this issue of the Federal Register to propose rules on procedure and administration applicable to this new excise tax.
DATES: Written or electronic comments
and requests for a public hearing must be
received by June 11, 2024.
ADDRESSES: Commenters are strongly
encouraged to submit public comments
electronically. Submit electronic submissions via the Federal eRulemaking Portal
at https://www.regulations.gov (indicate
IRS and REG-115710-22) by following
the online instructions for submitting comments. Requests for a public hearing must
be submitted as prescribed in the “Comments and Requests for a Public Hearing” section. Once submitted to the Federal
eRulemaking Portal, comments cannot be
edited or withdrawn. The Department of
the Treasury (Treasury Department) and
the IRS will publish for public availability
any comment submitted electronically or
on paper to its public docket.
Send paper submissions to: CC:PA:01:PR
(REG-115710-22), Room 5203, Internal
Revenue Service, P.O. Box 7604, Ben
Franklin Station, Washington, DC 20044.

May 13, 2024

FOR FURTHER INFORMATION
CONTACT:
Concerning
proposed
§§58.4501-1 through 58.4501-6, Samuel
G. Trammell at (202) 317-6975; concerning proposed §58.4501-7, Brittany N.
Dobi at (202) 317-5469; concerning proposed §1.1275-6(f)(12)(iii), Jonathan A.
LaPlante at (202) 317-3900; concerning
submissions of comments and requests for
a public hearing, Vivian Hayes at (202)
317-6901 (not toll-free numbers) or by
email at publichearings@irs.gov (preferred).
SUPPLEMENTARY INFORMATION:
Background
This notice of proposed rulemaking
proposes regulations under section 4501
of the Internal Revenue Code (Code)
that would implement the new excise
tax on repurchases of corporate stock
(stock repurchase excise tax) imposed
by section 4501 for repurchases made
after December 31, 2022. As proposed in
this notice of proposed rulemaking, the
regulations are proposed to be added as
proposed subpart A of new 26 CFR part
58 (Stock Repurchase Excise Tax Regulations), which is proposed to be added to
subchapter D of 26 CFR chapter I (Miscellaneous Excise Taxes). This notice of
proposed rulemaking also proposes to
amend regulations under section 1275
of the Code in 26 CFR part 1 (Income
Tax Regulations) to implement the provisions of section 4501. Another notice
of proposed rulemaking published in the
Proposed Rules section of this issue of
the Federal Register relating to the stock
repurchase excise tax proposes rules on
procedure and administration applicable to the reporting and payment of the
stock repurchase excise tax that would be
added as proposed subpart B of 26 CFR
part 58.
I. Overview of Section 4501
A. In general
Section 4501 was added to a new chapter 37 of the Code by the enactment of

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section 10201 of Public Law 117-169, 136
Stat. 1818 (August 16, 2022), commonly
referred to as the Inflation Reduction Act
of 2022 (IRA). Section 4501 imposes the
stock repurchase excise tax on each covered corporation for repurchases made
after December 31, 2022. The stock repurchase excise tax is equal to one percent
of the fair market value of any stock of
the corporation that is repurchased by the
corporation during the taxable year. Section 4501(a). For purposes of the stock
repurchase excise tax, the term “covered
corporation” means any domestic corporation the stock of which is traded on
an established securities market (within
the meaning of section 7704(b)(1) of the
Code). Section 4501(b).
Section 4501(c)(1) provides that repurchases of covered corporation stock to
which the stock repurchase excise tax may
apply include the following two types of
transactions. First, the term “repurchase”
means a redemption within the meaning
of section 317(b) of the Code with regard
to the stock of a covered corporation (section 317(b) redemption). Section 4501(c)
(1)(A). Second, the term “repurchase”
also means any transaction determined by
the Secretary of the Treasury or her delegate (Secretary) to be economically similar to a section 317(b) redemption (economically similar transaction). Section
4501(c)(1)(B).
B. Specified affiliates
For purposes of the stock repurchase
excise tax, section 4501(c)(2)(A) provides
a special rule that treats the acquisition of
stock of a covered corporation by a specified affiliate of the covered corporation,
from a person who is not the covered
corporation or a specified affiliate of the
covered corporation, as a repurchase of
the stock of the covered corporation by
the covered corporation. For this purpose,
the term “specified affiliate” means, with
regard to any corporation, (i) any corporation more than 50 percent of the stock
of which is owned (by vote or by value),
directly or indirectly, by the corporation,
and (ii) any partnership more than 50 percent of the capital interests or profits inter-

Bulletin No. 2024–20

ests of which is held, directly or indirectly,
by the corporation. Section 4501(c)(2)(B).
C. Adjustment to amount taken into
account under section 4501(a)
The stock repurchase excise tax is
applied to the fair market value of any
stock of the covered corporation repurchased by the covered corporation during
its taxable year. However, the amount of
these repurchases is reduced by the fair
market value of any issuances of the covered corporation’s stock during the covered corporation’s taxable year (netting
rule).
Specifically, the netting rule provides
that the amount taken into account under
section 4501(a) with respect to any stock
repurchased by a covered corporation is
reduced by the fair market value of any
stock issued by the covered corporation
during the taxable year, including the fair
market value of any stock issued or provided to employees of the covered corporation or employees of a specified affiliate of the covered corporation during the
taxable year (whether or not the stock is
issued or provided in response to the exercise of an option to purchase the stock).
Section 4501(c)(3).
D. Special rules for certain acquisitions
and repurchases of stock of certain
foreign corporations
Section 4501(d) provides special rules
for the imposition of the stock repurchase
excise tax on acquisitions of stock of applicable foreign corporations and covered
surrogate foreign corporations. For purposes of section 4501(d), the term “applicable foreign corporation” means any
foreign corporation the stock of which is
traded on an established securities market.
Section 4501(d)(3)(A). The term “covered
surrogate foreign corporation” means any
surrogate foreign corporation (as determined under section 7874(a)(2)(B) of
the Code by substituting “September 20,
2021” for “March 4, 2003” each place it
appears) the stock of which is traded on
an established securities market, but only
with respect to taxable years that include
any portion of the applicable period with
respect to that corporation under section
7874(d)(1). Section 4501(d)(3)(B).

Bulletin No. 2024–20

Section 4501(d)(1) applies in the case
of an acquisition of stock of an applicable foreign corporation by a specified
affiliate of the corporation (other than a
foreign corporation or a foreign partnership (unless the partnership has a domestic entity as a direct or indirect partner))
from a person that is not the applicable
foreign corporation or a specified affiliate of the applicable foreign corporation. If section 4501(d)(1) applies, then
for purposes of determining the stock
repurchase excise tax: (i) the specified
affiliate is treated as a covered corporation with respect to the acquisition; (ii)
the acquisition is treated as a repurchase
of stock of a covered corporation by the
covered corporation; and (iii) the adjustment under section 4501(c)(3) (that is,
the netting rule) is determined only with
respect to stock issued or provided by
the specified affiliate to employees of
the specified affiliate.
Section 4501(d)(2) applies in the case
of either a repurchase of stock of a covered surrogate foreign corporation by the
covered surrogate foreign corporation, or
an acquisition of stock of a covered surrogate foreign corporation by a specified
affiliate of such corporation. If section
4501(d)(2) applies, then for purposes of
determining the stock repurchase excise
tax: (i) the expatriated entity (within the
meaning of section 7874(a)(2)(A)) with
respect to the covered surrogate foreign
corporation is treated as a covered corporation with respect to the repurchase or
acquisition; (ii) the repurchase or acquisition is treated as a repurchase of stock
of a covered corporation by the covered
corporation; and (iii) the adjustment under
section 4501(c)(3) is determined only
with respect to stock issued or provided
by the expatriated entity to employees of
the expatriated entity.
E. Statutory exceptions to the application
of section 4501(a)
Section 4501(e) lists transactions
that are statutorily excepted, in whole
or in part, from the application of section 4501(a), each referred to as a “statutory exception” in this preamble. As a
result of the statutory exceptions, section
4501(a) does not apply to a repurchase of
a covered corporation’s stock:

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(1) To the extent that the repurchase
is part of a reorganization (within the
meaning of section 368(a) of the Code)
and no gain or loss is recognized on
the repurchase by the shareholder
under chapter 1 of the Code (chapter
1) by reason of the reorganization (section 4501(e)(1));
(2) In any case in which the stock
repurchased is, or an amount of stock
equal to the value of the stock repurchased
is, contributed to an employer-sponsored
retirement plan, employee stock ownership plan (ESOP), or similar plan (section
4501(e)(2));
(3) In any case in which the total value
of the stock repurchased during the taxable year does not exceed $1,000,000
(section 4501(e)(3));
(4) Under regulations prescribed by the
Secretary, in cases in which the repurchase
is by a dealer in securities in the ordinary
course of business (section 4501(e)(4));
(5) By a regulated investment company
(RIC), as defined in section 851 of the
Code, or by a real estate investment trust
(REIT), as defined in section 856(a) of the
Code (section 4501(e)(5)); or
(6) To the extent that the repurchase is
treated as a dividend for purposes of the
Code (section 4501(e)(6)).
F. Regulations and other guidance
Under section 4501(f), the Secretary is
authorized to prescribe such regulations
and other guidance as are necessary or
appropriate to carry out, and to prevent
the avoidance of, the purposes of the
stock repurchase excise tax. Regulations
or other guidance described in section
4501(f) may include guidance: (i) to prevent the abuse of the statutory exceptions;
(ii) to address special classes of stock and
preferred stock; and (iii) for the application of the special rules for acquisitions
of stock of certain foreign corporations
under section 4501(d).
G. Applicability of stock repurchase
excise tax provisions
Except to the extent that a statutory
exception applies, the stock repurchase
excise tax applies to repurchases after
December 31, 2022, subject to the netting
rule. See section 10201(d) of the IRA.

May 13, 2024

In contrast to the December 31, 2022,
effective date expressly provided by section
10201(d) of the IRA with regard to repurchases, the netting rule expressly takes into
account any issuances by a covered corporation during the entirety of its taxable year.
See generally section 4501(c)(3). Specifically, under the netting rule, the amount
taken into account under section 4501(a)
with respect to any repurchases is “reduced
by the fair market value of any stock issued
by the covered corporation during the taxable year.” Section 4501(c)(3) (emphasis
added). Therefore, a covered corporation
with a taxable year that both began before
January 1, 2023, and ended after December 31, 2022, may apply the netting rule to
reduce the fair market value of the covered
corporation’s repurchases of stock during
the portion of that taxable year beginning
on January 1, 2023, by the fair market
value of all issuances of its stock during the
entirety of that taxable year.
H. No deduction for payment of stock
repurchase excise tax
No deduction is allowed for the payment of the stock repurchase excise tax.
See section 275(a)(6) of the Code (as
amended by section 10201(b) of the IRA
to add a reference to chapter 37, which
contains section 4501).
II. Notice 2023-2
On January 17, 2023, the Treasury
Department and the IRS published Notice
2023-2, 2023-3 I.R.B. 374, to provide initial guidance regarding the application of
the stock repurchase excise tax. Specifically, the Treasury Department and the
IRS published Notice 2023-2 to facilitate
administration of the stock repurchase
excise tax by describing rules expected
to be provided in forthcoming proposed
regulations for determining the amount of
stock repurchase excise tax owed, along
with anticipated rules for reporting and
paying any liability for the tax.
Under those rules, the amount of
stock repurchase excise tax imposed on
a covered corporation equals the product
obtained by multiplying one percent by
the stock repurchase excise tax base of the
covered corporation. The “stock repurchase excise tax base” is the amount (not

May 13, 2024

less than zero) obtained by: (i) determining the aggregate fair market value of all
repurchases of the covered corporation’s
stock by the covered corporation during
its taxable year; (ii) reducing that amount
by the fair market value of stock of the
covered corporation repurchased during
its taxable year to the extent any statutory
exceptions apply; and then (iii) further
reducing that amount by the aggregate
fair market value of stock of the covered
corporation issued or provided by the covered corporation during its taxable year
under the netting rule.
The Treasury Department and the IRS
have received feedback on the stock repurchase excise tax, including in response to
Notice 2023-2. Based on the feedback
received, and based on further consideration of section 4501 and Notice 2023-2,
the Treasury Department and the IRS are
proposing these regulations under section
4501 to be added as a new part 58 under
the Miscellaneous Excise Taxes, as well
as adding new §1.1275-6(f)(12)(iii) to 26
CFR part 1.
The issues related to section 4501
and Notice 2023-2 with respect to which
stakeholders have provided feedback, as
well as issues that the Treasury Department and the IRS have considered after
the publication of Notice 2023-2, are discussed in the following Explanation of
Provisions.
Explanation of Provisions
Subpart A of new part 58 would provide operative rules under section 4501.
Proposed §58.4501-1 would provide an
overview of the stock repurchase excise
tax, generally applicable definitions, the
scope of the regulations implementing that
tax, and certain operating rules applicable
to those regulations. Proposed §58.4501-2
would provide general rules regarding
the application and computation of the
stock repurchase excise tax and proposed
§58.4501-7 would provide rules specifically relating to the application of section
4501(d). Except as provided in proposed
§58.4501-7, proposed §58.4501-3 would
provide rules regarding the application of
the exceptions in section 4501(e) (other
than the de minimis exception described in
section 4501(e)(3) and to which proposed
§58.4501-2(b)(2) applies), and proposed

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§58.4501-4 would provide rules regarding the application of section 4501(c)
(3). Proposed §58.4501-5 would provide
examples that illustrate the application of
section 4501, other than the provisions
of proposed §58.4501-7 (which are illustrated by examples in §58.4501-7(p) and
(q)), and proposed §58.4501-6 would provide applicability dates (other than for the
rules in §58.4501-7).
I. Statutory Effective Date; Transition
Relief
A. Repurchases by a fiscal-year taxpayer
prior to the statutory effective date
A covered corporation is not subject to
the stock repurchase excise tax with regard
to a taxable year if, during that taxable
year, the aggregate fair market value of
the covered corporation’s repurchases of
its stock does not exceed $1,000,000 (de
minimis exception). See section 4501(e)
(3); see also section 3.03(2)(a) of Notice
2023‑2.
One stakeholder requested that the proposed regulations make clear that repurchases of stock by a fiscal-year taxpayer
prior to the January 1, 2023, effective date
of section 4501 are not taken into account
for purposes of applying the de minimis
exception. According to the stakeholder,
the plain language of the statute requires
that repurchases by a fiscal-year taxpayer
prior to January 1, 2023, not be taken into
account for any purpose under section
4501, including for purposes of applying
the de minimis exception.
The Treasury Department and the
IRS have interpreted section 4501 in the
same manner. The rule described in section 3.03(3)(b) of Notice 2023-2 provides
that repurchases by a covered corporation
before January 1, 2023, are not included in
the covered corporation’s stock repurchase
excise tax base. The proposed regulations
would clarify that repurchases before January 1, 2023, are not taken into account for
purposes of applying the de minimis exception. See proposed §58.4501‑2(c)(3).
B. Issuances by a fiscal-year taxpayer
prior to the effective date
One stakeholder recommended that
stock issued by a fiscal-year taxpayer

Bulletin No. 2024–20

prior to January 1, 2023, should not be
taken into account for purposes of the netting rule, because such an approach would
create a mismatch between the treatment
of issuances for purposes of the netting
rule and the treatment of repurchases for
purposes of the de minimis exception. See
part I.A of this Explanation of Provisions.
Another stakeholder recommended that
fiscal-year taxpayers be permitted to use
only net issuances (that is, issuances net
of repurchases) from the portion of their
taxable year prior to January 1, 2023,
because, according to the stakeholder, taxpayers arguably should not be permitted to
offset gross issuances during the portion
of a fiscal year before January 1, 2023,
against repurchases during the portion of
a fiscal year beginning on January 1, 2023.
The Treasury Department and the IRS
disagree with the stakeholders’ recommendations. Section 4501(c)(3) expressly provides that the amount taken into account
under section 4501(a) with respect to any
stock repurchased by a covered corporation is reduced by the fair market value of
any stock issued by the covered corporation “during the taxable year.” Moreover,
although section 10201(d) of the IRA
expressly provides that the stock repurchase excise tax applies to repurchases
after December 31, 2022, it does not contain similar language for issuances. Therefore, the Treasury Department and the IRS
are of the view that, in the case of a covered corporation that has a taxable year that
both begins before January 1, 2023, and
ends after December 31, 2022, that covered corporation may apply the netting rule
to reduce the fair market value of the covered corporation’s repurchases during that
taxable year by the fair market value of all
issuances of its stock during the entirety of
that taxable year. See proposed §58.45014(b)(3). Thus, the proposed regulations
would not adopt these recommendations.
C. Contributions by fiscal-year taxpayer
to employer-sponsored retirement plan
prior to effective date
A stakeholder also recommended that
stock contributed by a fiscal-year taxpayer
to an employer-sponsored retirement plan
prior to the January 1, 2023, effective
date of section 4501, should not be taken
into account for purposes of the statutory

Bulletin No. 2024–20

exception in section 4501(e)(2) because,
according to the stakeholder, such an
approach would create a mismatch
between this exception and the de minimis exception. However, as discussed in
part I.B of this Explanation of Provisions,
the effective date in section 10201(d) of
the IRA expressly applies to repurchases
(and not to issuances or contributions).
Therefore, the Treasury Department and
the IRS are of the view that contributions
to an employer-sponsored retirement plan
during the 2022 portion of a taxable year
beginning before January 1, 2023, and
ending after December 31, 2022, should
be taken into account for purposes of section 4501(e)(2). See proposed §58.45013(d)(5).

A stakeholder asked whether the date
of repurchase of stock occurs on (i) the
trade date for the sale or purchase of that
stock (that is, the date a broker executes
the trade), or (ii) the settlement date with
regard to that stock (that is, the date the
shares are delivered). The stakeholder
asked this question for purposes of determining whether a repurchase occurs after
the effective date of section 4501. The
stakeholder requested that the proposed
regulations clarify that the trade date for
the sale or purchase of that stock constitutes the date of repurchase.
The proposed regulations would clarify that the date of repurchase for a regular-way sale of stock on an established
securities market (that is, a transaction in
which a trade order is placed on the trade
date, and settlement of the transaction,
including payment and delivery of the
stock, occurs a standardized number of
days after the trade date) is the trade date.
See proposed §58.4501-2(g)(2). For rules
regarding the date of repurchase generally,
see part III.B.1 of this Explanation of Provisions.

1, 2023, effective date of section 4501,
pursuant to a binding commitment entered
into before the August 16, 2022, enactment date of section 4501. For example,
one stakeholder requested an exemption
for redemptions of stock issued before the
enactment date and redeemed pursuant
to the terms of the stock after the effective date, on the grounds that the stock
repurchase excise tax did not exist when
the terms of that stock were negotiated.
Another stakeholder suggested that candidates for transition relief could include:
(i) redemptions by, and liquidations of,
a special purpose acquisition company
(SPAC) formed prior to the enactment
date (to the extent the SPAC is contractually obligated to offer redemption rights
to its shareholders as agreed prior to the
enactment date); (ii) payments in connection with merger and acquisition (M&A)
transactions pursuant to a binding commitment entered into prior to the enactment date; (iii) redemptions of non-participating, non-convertible preferred stock,
and complete redemptions of tracking
stock, issued prior to the enactment date;
(iv) repurchases pursuant to accelerated
share repurchase agreements if completed pursuant to a binding commitment
entered into prior to the enactment date;
and (v) liquidating distributions subject to
section 331 of the Code pursuant to a plan
of liquidation adopted prior to the enactment date.
The plain language of section 10201(d)
of the IRA provides that the amendments
made by section 10201 of the IRA apply
to repurchases of stock after December
31, 2022. That section contains no reference to repurchases that occur pursuant to
a binding commitment entered into prior
to the enactment date. As a result, the
Treasury Department and the IRS are of
the view that transition relief would not
be appropriate. The proposed regulations
accordingly would not adopt the stakeholders’ recommendation.

E. Transition relief for certain
transactions entered into prior to
enactment date

II. Application of the Stock Repurchase
Excise Tax to Various Types of Financial
Instruments

Several stakeholders requested transition relief (that is, an exemption from the
stock repurchase excise tax) for certain
repurchases that occur after the January

A. Definition of “stock”

D. Trade date or settlement date

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For purposes of Notice 2023-2, “stock”
would be defined as any instrument issued

May 13, 2024

by a corporation that is stock or that is
treated as stock for Federal tax purposes at
the time of issuance, regardless of whether
the instrument is traded on an established
securities market. See section 3.02(25) of
Notice 2023-2.
The proposed regulations generally
would maintain this definition of “stock.”
See proposed §58.4501-1(b)(29). However, the proposed definition of “stock”
would not include “additional tier 1 preferred stock,” which the proposed regulations would define to mean preferred
stock that qualifies as additional tier 1
capital (within the meaning of 12 CFR
3.20(c), 217.20(c), or 324.20(c)) and
does not qualify as common equity tier
1 capital (within the meaning of 12 CFR
3.20(b), 217.20(b), or 324.20(b)). See
proposed §58.4501-1(b)(29)(ii). Therefore, unless the limited-scope exception
regarding additional tier 1 preferred
stock applies, the stock repurchase excise
tax would apply to preferred stock in the
same manner as to common stock. Likewise, the stock repurchase excise tax
would apply to repurchases of instruments that are not in the legal form of
stock but that are treated as stock for Federal tax purposes at the time of issuance.
In contrast, the stock repurchase excise
tax would not apply to repurchases of
instruments treated as debt for Federal
tax purposes.
The proposed regulations would
include the foregoing definition of “stock”
for the following reasons. First, the plain
language of section 4501 repeatedly refers
to “stock” and does not, for example, refer
solely to “common stock.” See, for example, section 4501(a) (imposing an excise
tax “equal to 1 percent of the fair market
value of any stock of the corporation”);
section 4501(b) (defining the term covered corporation to mean “any domestic
corporation the stock of which is traded on
an established securities market”); section
4501(c)(1)(A) (defining the term repurchase to mean a redemption within the
meaning of section 317(b) “with regard
to the stock of a covered corporation”).
Second, if the stock repurchase excise tax
were implemented to be applicable solely
to common stock, then taxpayers could
avoid the tax simply by repurchasing other
classes of stock (or other instruments
treated as stock for Federal tax purposes).

May 13, 2024

Section 4501(f)(2) authorizes the Secretary to issue such regulations and other
guidance as are necessary or appropriate
to carry out, and to prevent the avoidance
of, the purposes of the stock repurchase
excise tax, including guidance “to address
special classes of stock and preferred
stock.” Accordingly, in section 6.01(1)
of Notice 2023-2, the Treasury Department and the IRS requested comments
on whether there are circumstances under
which special rules should be provided
for redeemable preferred stock or other
special classes of stock or debt (including
debt with features that allow the debt to
be converted into stock) and, if so, what
objectively verifiable criteria should be
incorporated into such special rules to provide certainty for taxpayers and the IRS.
1. Straight Preferred Stock; Mandatorily
Redeemable Stock
Stakeholders recommended that the
stock repurchase excise tax should not
apply to redemptions of preferred stock.
Although two stakeholders recommended
an exception for redemptions of any type
of preferred stock, other stakeholders generally recommended an exception only
for redemptions of so-called “straight preferred stock” (that is, preferred stock that is
limited and preferred as to dividends, does
not participate in corporate growth to any
significant extent, and is not convertible
into another class of stock). See section
1504(a)(4)(B) and (D) of the Code. One
stakeholder also argued against providing
an exception for redemptions of preferred
stock other than straight preferred stock.
See part II.A.2 of this Explanation of Provisions.
The stakeholders uniformly contended
that, although straight preferred stock
is treated as “stock” for Federal tax purposes, repayments of such stock are akin
to repaying debt and do not implicate
the policy concerns underlying the stock
repurchase excise tax. The stakeholders
further contended that, if redemptions of
straight preferred stock were subject to
the stock repurchase excise tax, publicly
traded corporations might be incentivized
to increase their leverage by issuing debt
in lieu of straight preferred stock.
One stakeholder also recommended a
rule under which actual or deemed issu-

1074

ances of straight preferred stock would
not be taken into account for purposes of
the netting rule. The stakeholder further
recommended that exchanges of straight
preferred stock for other stock (that is, for
stock to which the stock repurchase excise
tax applies) should be treated as economically similar transactions.
Alternatively, stakeholders recommended an exception to the stock repurchase excise tax for the redemption of
stock pursuant to a mandatory redemption
provision or a unilateral put option of the
shareholder. In the stakeholders’ view, this
exception would be appropriate because
such a redemption would not be within the
control of (and would not be susceptible
to any timing manipulation by) the issuing
corporation.
As described in part II.A of this Explanation of Provisions, the plain language
of section 4501 consistently refers to
“stock” without providing any exceptions
for particular types of stock. In addition,
the Treasury Department and the IRS
are of the view that Treasury regulations
that utilize the broadly applicable term
“stock” would facilitate the IRS’s ability
to administer and enforce the stock repurchase excise tax. Consequently, the Treasury Department and the IRS also are of
the view that adoption of the stakeholders’
numerous suggested exceptions would
significantly hamper the IRS’s ability to
administer and enforce that tax, as well
as reduce taxpayer certainty regarding its
application. Therefore, except with regard
to additional tier 1 preferred stock, the
proposed regulations would not incorporate the stakeholders’ suggested exceptions. See proposed §§58.4501-1(b)(29),
58.4501-2(e)(2), and 58.4501-4(b)(1); see
also proposed §58.4501-1(b)(29)(ii) and
part II.A.3 of this Explanation of Provisions (discussion of additional tier 1 preferred stock).
2. Convertible Preferred Stock and
Participating Preferred Stock
One stakeholder recommended that,
even if straight preferred stock is excluded
from the stock repurchase excise tax, preferred stock that is convertible into the
issuer’s common stock at the holder’s
option (convertible preferred stock), and
preferred stock with certain dividend or

Bulletin No. 2024–20

liquidation participation rights that enable
the holder to participate in corporate
growth to a significant extent (participating preferred stock), should continue to
be subject to the stock repurchase excise
tax. In the stakeholder’s view, a redemption of such stock generally is more akin
to a redemption of common stock than to
a repayment of debt or a redemption of
straight preferred stock (for example, there
are fewer outstanding shares of stock participating in future corporate growth after
such a redemption).
For the reasons stated in part II.A.1
of this Explanation of Provisions, the
Treasury Department and the IRS agree
with the stakeholder’s recommendation.
Accordingly, under the proposed regulations, the repurchase of convertible or participating preferred stock would be subject to the stock repurchase excise tax, and
the issuance of such stock would be taken
into account for purposes of the netting
rule. See proposed §§58.4501-1(b)(29),
58.4501-2(e)(2), and 58.4501-4(b)(1).
3. Additional Tier 1 Preferred Stock
Several stakeholders noted that the
issuance and redemption of preferred
stock is used routinely in certain industries as a way to manage risk. One stakeholder recommended an exception to the
stock repurchase excise tax and the netting rule for redemptions or issuances of
preferred stock that qualifies as additional
tier 1 capital for purposes of regulatory
requirements for regulated financial institutions (additional tier 1 preferred stock).
According to the stakeholder, the issuing corporation may not redeem or repurchase additional tier 1 preferred stock
without prior approval from regulators.
Moreover, if such an instrument is callable
by its terms, (i) it may not be called for
at least five years; (ii) the issuing corporation must receive prior approval from regulators to exercise the call option; and (iii)
the issuing corporation must either replace
the instrument with other tier 1 capital or
demonstrate to regulators that it will continue to hold capital commensurate with
risk.
Based on the feedback received, the
Treasury Department and the IRS are of
the view that the stock repurchase excise
tax regulations should not apply to addi-

Bulletin No. 2024–20

tional tier 1 preferred stock. See proposed
§58.4501-1(b)(29)(ii).
Consequently,
under the proposed regulations, additional
tier 1 preferred stock would not be subject to the stock repurchase excise tax, and
the issuance of additional tier 1 preferred
stock would not be taken into account for
purposes of the netting rule.
4. Convertible Debt
Stakeholders have requested confirmation that redemptions of convertible debt
instruments are not subject to the stock
repurchase excise tax. One stakeholder
contended that such transactions should
not be treated as “economically similar”
to a section 317(b) redemption because
the definition of “redemption” in section
317(b) encompasses only redemptions
of stock, and because a redemption of
a convertible debt instrument does not
reduce the number of a corporation’s outstanding shares. Another stakeholder contended that the determination of whether
an instrument constitutes debt or equity
should be made at the time of issuance.
Therefore, if the convertible debt instrument is characterized as “debt” at the time
of issuance, the subsequent redemption or
cash settlement of that instrument should
not be treated as a repurchase. Likewise,
the issuance of a convertible debt instrument by a covered corporation should not
be treated as an issuance for purposes of
the netting rule.
The Treasury Department and the IRS
agree with these stakeholders. Although
Notice 2023-2 does not expressly address
convertible debt instruments, the Treasury
Department and the IRS continue to be of
the view that, for purposes of the stock
repurchase excise tax, whether an instrument is debt or equity should be determined at the time of issuance under Federal income tax principles, and that this
characterization should not be retested
while the debt instrument is outstanding.
See proposed §58.4501-1(b)(29); see also
part II.B of this Explanation of Provisions.
Such an approach would better facilitate
the IRS’s ability to administer and enforce
the stock repurchase excise tax and enable
taxpayers to apply the tax with greater certainty. Moreover, the term “repurchase”
includes only section 317(b) redemptions
with regard to “stock” of a covered corpo-

1075

ration as well as transactions that are “economically similar” to such redemptions.
See section 4501(c)(1). Accordingly, the
Treasury Department and the IRS are of
the view that no special rules are needed
for convertible debt. However, for a discussion of the application of the netting
rule to an instrument not in the legal form
of stock, see part XI.C.9 of this Explanation of Provisions.
5. Tracking Stock
Tracking stock is an instrument that
tracks the performance of a division of
the parent corporation or a subsidiary (for
example, by providing dividend rights
that are determined by reference to the
earnings of the tracked division or subsidiary). Because tracking stock participates
in corporate growth, a stakeholder recommended treating the redemption of less
than all shares of a class of tracking stock
in the same manner as the redemption of
other common stock—that is, as subject to
the stock repurchase excise tax.
However, the stakeholder also suggested that an exemption may be warranted for the redemption of an entire
class of tracking stock in connection with
the disposition of the underlying tracked
business, because such a redemption (i)
does not accrete to the interests of the corporation’s remaining shareholders in the
corporation’s remaining assets, and (ii)
may be equivalent to a distribution in partial liquidation. (As discussed in part VI.B
of this Explanation of Provisions, the
stakeholder recommended treating partial
liquidations as generally outside the scope
of the stock repurchase excise tax.)
The Treasury Department and the IRS
are of the view that the treatment of tracking stock for purposes of the stock repurchase excise tax should follow the general
Federal tax treatment of tracking stock.
Accordingly, no special guidance regarding the proper treatment of tracking stock
is included in these proposed regulations.
B. Characterization of instruments as
stock or debt
One stakeholder requested confirmation that the determination of whether an
instrument is stock or debt for purposes of
the stock repurchase excise tax is made

May 13, 2024

at the time of issuance under Federal tax
principles, and that this characterization
is not retested subsequently while the
instrument is outstanding. The Treasury
Department and the IRS agree with this
recommendation, because, as previously
stated, such an approach under which an
instrument is tested only once would better facilitate the IRS’s ability to administer
and enforce the stock repurchase excise
tax and enable taxpayers to apply the
tax with greater certainty. See proposed
§58.4501-1(b)(29).
C. Options and similar financial
instruments
1. Overview
As discussed previously, Notice
2023-2 would define “stock” to mean any
instrument issued by a corporation that is
stock or that is treated as stock for Federal
tax purposes at the time of issuance. See
section 3.02(25) of Notice 2023-2. This
definition of “stock” generally excludes
options other than options that are treated
as stock for Federal tax purposes at the
time of issuance.
To the extent option contracts are not
treated as stock at the time of issuance,
the acquisition of such contracts is not a
repurchase under Notice 2023-2 because
such acquisition is neither a section 317(b)
redemption nor included in the exclusive
list of economically similar transactions in
section 3.04(4)(a) of Notice 2023-2. Consequently, under Notice 2023-2, there is
a repurchase or an issuance of stock only
at the time of exercise of a physically settled option (when a covered corporation
repurchases or issues the actual underlying stock). In turn, the amount of such
repurchase or issuance is equal to the market price of the stock on the date the stock
is repurchased or issued. See sections
3.06(1)(a), 3.06(2), 3.08(2), and 3.08(5)
of Notice 2023-2; see also part III of this
Explanation of Provisions (discussion of
valuation and timing).
Several questions have arisen regarding the application of the stock repurchase
excise tax to options and similar financial
instruments. In section 6.02(4) of Notice
2023-2, the Treasury Department and the
IRS requested comments on: (i) whether
any additional rules with regard to finan-

May 13, 2024

cial arrangements, such as options or other
similar financial instruments, should be
added to prevent avoidance of the stock
repurchase excise tax; and (ii) how such
additional rules should apply consistently
for purposes of determining a covered
corporation’s repurchases and issuances.
2. Physical Settlement of Option
Contracts
Stakeholders recommended that the fair
market value of shares acquired or issued
(as appropriate) by a covered corporation
upon physical settlement of an option contract should be the fair market value of the
shares on the date of exercise, rather than
the strike price (that is, the price at which
the option can be exercised). For example
(Example 1), assume that corporation X
issues a call option to individual A that
entitles A to buy 100 shares of X stock for
$100 ($1.00 per share) from X for a limited time. The terms of the option require
physical settlement. On the date the option
is issued, X stock is trading at $1.00 per
share. On the date the option is exercised,
X stock is trading at $1.30 per share. Upon
settlement of the option, A pays $100 to X,
which issues 100 shares of X stock (worth
$130) to A.
Alternatively (Example 2), assume the
same facts as in Example 1, except that X
issues a put option to A that entitles A to
sell 100 shares of X stock for $100 ($1.00
per share) to X, and that X stock is trading
at $0.70 per share on the date the option
is exercised. To settle the option, X purchases 100 shares of X stock (worth $70)
for $100 from A.
As another example (Example 3),
assume that A issues a call option to unrelated individual B that entitles B to buy
100 shares of X stock for $100 ($1.00
per share) from A for a limited time. The
terms of the option require physical settlement. Subsequently, X purchases the
option contract from B. On the date the
option is exercised, X stock is trading at
$1.30 per share. To settle the option, X
pays $100 to A, who delivers 100 shares
of X stock (worth $130) to X.
The netting rule requires the stock
repurchase excise tax base to be reduced by
“the fair market value of any stock issued
by the covered corporation during the taxable year.” See section 4501(c)(3). Thus,

1076

according to stakeholders, the amount of
the issuance in Example 1 should be $130
(the fair market value of the stock at the
time of issuance) even though A pays only
$100 to excise the option.
Similarly, the stock repurchase excise
tax applies to “the fair market value of
any stock of the corporation which is
repurchased by such corporation during
the taxable year.” See section 4501(a).
Consequently, stakeholders suggested that
the amount of the repurchase in Example
2 should be $70, and that the $30 premium
paid by X represents the amount paid for
a property right separate from the stock
being repurchased. Cf. Rev. Rul. 70-108,
1970-1 C.B. 78 (holding that the right to
purchase additional shares constitutes separate property from the underlying shares).
Consistent with this approach, stakeholders also suggested that the amount of the
repurchase in Example 3 should be $130
(the fair market value of the stock on the
exercise date).
The Treasury Department and the
IRS agree with the stakeholders that the
amount of the issuance in Example 1
should be $130 (the fair market value
of the issued stock on the exercise date)
rather than $100 (the strike price paid by
A). Similarly, the Treasury Department
and the IRS agree that the amount of the
repurchase in Example 2 should be $70
rather than $100, and that the amount of
the repurchase in Example 3 should be
$130 rather than $100.
The foregoing approach, which is consistent with Notice 2023-2, is embedded
in the proposed rules regarding the fair
market value of repurchased or issued
stock. See proposed §§58.4501-2(h)
(1) and 58.4501-4(e)(1), respectively.
Thus, the Treasury Department and the
IRS are of the view that special rules are
not needed with respect to the fair market value of stock repurchased or issued
upon the physical settlement of an option.
However, the proposed regulations would
include several examples to illustrate
the proposed approach. See proposed
§58.4501-5(b)(26) and (28). For special
rules for valuing stock issued or provided
to an employee or other service provider
in connection with the performance of services, see proposed §58.4501-4(e)(5) and
part XI.G.7 of this Explanation of Provisions.

Bulletin No. 2024–20

3. Cash Settlement of Option Contracts
As previously discussed in part II.C.2
of this Explanation of Provisions, stakeholders recommended treating the physical settlement of an option as a repurchase
or an issuance (as appropriate) based on
the fair market value of the stock repurchased or issued on the date of exercise.
In contrast, a stakeholder recommended
that the cash settlement of a put option
issued by a covered corporation should
not be treated as a repurchase by the covered corporation, because any excess of
the strike price over the fair market value
of the underlying stock should be viewed
as payment for property that is separate
from the underlying stock. Cf. Rev. Rul.
70-108.
For example, assume that corporation
X issues a put option to individual A that
entitles A to sell 100 shares of X stock for
$100 ($1.00 per share) to X, and that X
stock is trading at $0.70 per share on the
date the option is exercised. The terms
of the option require net cash settlement;
thus, X pays $30 to A to settle the option.
The stakeholder recommended not treating the net cash settlement as a repurchase, even though the settlement could
be construed as a purchase by X of the
100 X shares from A for $100, immediately followed by an issuance by X of 100
shares to A for $70.
For the cash settlement of a call option,
the stakeholder generally recommended
either (i) treating the net cash settlement
as a deemed issuance of stock immediately followed by a repurchase of the same
stock (resulting in no net adjustment to the
stock repurchase excise tax base), or (ii)
simply disregarding the cash settlement
altogether for purposes of the stock repurchase excise tax. For example, assume
that X issues a call option to A that entitles
A to buy 100 shares of X stock for $100
($1.00 per share) from X, and that X stock
is trading at $1.30 per share on the date
the option is exercised. The terms of the
option require net cash settlement; thus, X
pays $30 to A to settle the option.
The net cash payment in the foregoing
example is the economic equivalent of (i)
A paying $100 to exercise the option, (ii)
X issuing 100 shares (worth $130) to A,
and then (iii) X immediately redeeming
those shares for $130 in cash. Thus, X

Bulletin No. 2024–20

could be deemed to have issued and repurchased $130 of its shares in a transaction
that fully offsets for purposes of the stock
repurchase excise tax. Alternatively, X’s
net cash settlement could be disregarded
altogether and simply treated as the sale
or exchange of an option. See section
1234(c)(2); Rev. Rul. 88-31, 1988-1 C.B.
302 (providing that the net cash settlement
of a price-protection contingent value
right is treated as a cash settlement of a
put option subject to section 1234(c)(2)).
The Treasury Department and the IRS
are of the view that, for purposes of the
stock repurchase excise tax, the net cash
settlement of an option should not be
treated as involving a deemed issuance
and repurchase of shares in the interest of
simplicity and administrability. Accordingly, under the proposed regulations, the
net cash settlement of an option contract
would result in neither the repurchase nor
the issuance of stock other than as discussed in part II.C.4 of this Explanation
of Provisions. This rule would apply to
the net cash settlement of an embedded
option (for example, if the issuer pays the
investor solely in cash on exercise of the
conversion right in a convertible bond).
See proposed §§58.4501-2(e)(5)(v) and
58.4501-4(f)(12).
4. Deep-in-the-Money Options
Several stakeholders recommended
that options that are treated as constructively exercised at the time of their grant
under Federal income tax principles
(commonly referred to as “deep-in-themoney” options) should be treated similarly for purposes of the stock repurchase
excise tax. For example, according to the
stakeholders, if the grant of an option is
treated as the issuance of the underlying
stock as of the date of the grant for Federal income tax purposes, the grant of the
option should be treated as an issuance of
stock for purposes of the netting rule, and
the cash settlement of the option should be
treated as a repurchase of stock in the year
of the settlement.
The stakeholders further recommended
that the determination of whether an option
is deep in the money should be made only
at the time of grant and generally should
not be revisited. Thus, if a corporation
grants a call option that is exercisable or

1077

convertible into the corporation’s stock
and that is not constructively exercised at
the time of grant, the stock should not be
treated as issued until the option is exercised or converted into stock.
The Treasury Department and the IRS
are of the view that, if a deep-in-themoney option is determined to be constructively exercised at the time of grant
under Federal income tax principles, the
cash settlement of such an option would
be a repurchase of the underlying stock on
the date of settlement under the proposed
regulations. See proposed §58.4501-2(e)
(5)(v). However, for a discussion of the
application of the netting rule to deep-inthe-money options or other instruments
not in the legal form of stock, see part
XI.C.9 of this Explanation of Provisions.
5. Section 305(a) Warrants
A stakeholder recommended that, if an
option to acquire a covered corporation’s
stock is distributed in a distribution under
section 305(a) of the Code (section 305(a)
warrant), the adjustment to the stock
repurchase excise tax base upon settlement of the section 305(a) warrant should
be determined by reference to the strike
price (and not the value of the underlying
stock) because the section 305(a) distribution should be disregarded.
The Treasury Department and the IRS
are of the view that the treatment of warrants distributed in a section 305 distribution should not deviate from the treatment
of other types of financial instruments
under the proposed regulations. The Treasury Department and the IRS view this
approach as facilitating the IRS’s ability to
administer and enforce the stock repurchase
excise tax and enable taxpayers to apply
the tax with greater certainty. Accordingly,
the proposed regulations would not provide special rules for warrants distributed
in a section 305 distribution. See proposed
§§58.4501-2(e)(5)(v) and 58.4501-4(f)
(12); see also part II.C.3 of this Explanation of Provisions (discussion of cash settlement of option contracts).
6. Integration of Qualifying Debt
Instruments under §1.1275-6
A stakeholder requested clarification
on how section 4501 applies to a syn-

May 13, 2024

thetic debt instrument resulting from an
integrated transaction under §1.1275-6.
In general, §1.1275-6 provides for the
integration of a qualifying debt instrument (as defined in §1.1275-6(b)(1))
with a §1.1275-6 hedge or combination
of §1.1275-6 hedges in certain circumstances. The circumstances in which
§1.1275-6 may apply involve a convertible debt instrument as well as one or more
options or other financial instruments
involving underlying stock, provided that
the combined cash flows of the financial
instrument and the debt instrument permit
the calculation of a yield to maturity under
section 1272 of the Code or the right to the
combined cash flows would qualify as a
specified type of variable rate debt instrument, and other conditions are satisfied.
Under §1.1275-6(f), except as otherwise provided in published guidance, the
synthetic debt instrument resulting from
an integrated transaction is recognized
as a single debt instrument for Federal
income tax purposes for the period that
the transaction qualifies as an integrated
transaction and is not subject to the Federal income tax rules that would apply on
a separate basis to the instruments comprising the integrated transaction if the
transaction were not integrated.
Because an integrated transaction does
not change the amount of stock actually
repurchased or issued, the Treasury Department and the IRS are of the view that the
determination of whether and when stock
is repurchased or issued for purposes of
the stock repurchase excise tax should
be determined without regard to the integration of a qualifying debt instrument
with a §1.1275-6 hedge or combination
of §1.1275-6 hedges under §1.1275-6. See
proposed §1.1275-6(f)(12)(iii).
D. Forfeiture or clawback of restricted
stock
One stakeholder recommended that
the forfeiture of restricted stock (that is,
stock transferred to a service provider that
is subject to a substantial risk of forfeiture
at grant) that was transferred to a service
provider in connection with the performance of services should not be treated
as a repurchase for purposes of the stock
repurchase excise tax to the extent no
payment is made to the service provider

May 13, 2024

in connection with the forfeiture. Instead,
the stakeholder recommended treating the
stock as repurchased only to the extent of
any payment received in connection with
the forfeiture, with any excess of the value
of the stock over the amount paid treated as
a forfeiture. In other words, the stakeholder
recommended using the amount paid rather
than market price to compute the amount of
the repurchase in this situation.
The stakeholder cited to §1.83-6(c) in
support of its recommendation. Section
1.83-6(c) provides that, if (under section 83(h) of the Code and §1.83-6(a)) a
deduction, an increase in basis, or a reduction of gross income was allowable to an
employer in respect of a transfer of property, and if such property subsequently is
forfeited, then the amount of such deduction, increase in basis, or reduction of
gross income is included in the employer’s gross income for the taxable year in
which the forfeiture occurs. According to
the stakeholder, the fact that the employer
does not recognize additional income or
gain suggests that the property forfeited,
to the extent it exceeds any amount paid
by the employer to the forfeiting service
provider, is treated as a capital contribution to the employer under section 118(a)
rather than as a redemption.
Notice 2023-2 does not expressly
address the forfeiture of restricted stock.
Under section 3.06(2) of Notice 2023-2,
if property is paid for the forfeited stock,
the stock is treated as repurchased for
an amount equal to the market price on
the date of repurchase (regardless of the
amount actually paid) because there is a
section 317(b) redemption. If no property
is paid in exchange for the forfeited shares,
the forfeiture is not treated as a repurchase,
because the forfeiture is neither a section
317(b) redemption nor treated as an economically similar transaction. However,
under both Notice 2023-2 and these proposed regulations, there would be an issuance for purposes of the netting rule when
the ownership of the restricted stock transfers to the recipient for Federal income tax
purposes. See proposed §58.4501-4(d)(2).
The Treasury Department and the IRS
are of the view that, if a covered corporation takes into account an issuance of
restricted stock for purposes of the netting rule because a section 83(b) election
has been made, a forfeiture of such stock

1078

likewise should be treated as a repurchase.
Conversely, if a covered corporation
does not take into account an issuance of
restricted stock for purposes of the netting
rule, a forfeiture of such stock should not
be treated as a repurchase. This approach
is necessary to preserve consistency in the
treatment of issuances and repurchases.
Moreover, the economic effect of a forfeiture is similar to that of a repurchase,
insofar as the shares are retired (or held as
treasury stock) in both cases.
Accordingly, the proposed regulations
would treat a forfeiture of restricted stock
as a repurchase on the date of forfeiture
(in an amount equal to the fair market
value of such stock on the date of forfeiture) if such forfeited stock was treated
as issued or provided under the netting
rule. See proposed §58.4501-2(e)(4)(vi);
see also part XII.D of this Explanation
of Provisions (discussion of a proposal
to provide similar treatment with regard
to forfeitures of stock issued as part of an
earnout or to satisfy an indemnification
obligation).
It is the view of the Treasury Department and the IRS that stock received by a
covered corporation or specified affiliate
pursuant to a clawback agreement (that
is, a contractual provision that requires
an employee to return vested stock) is
economically similar to restricted stock
forfeited to the covered corporation after
failure to vest. Accordingly, these proposed regulations also would provide
that, if the stock were treated as issued or
provided under the netting rule, then the
clawed back stock would be treated as
repurchased on the date of clawback (in
an amount equal to the fair market value
of such stock on such date). See proposed
§58.4501-2(e)(4)(vi).
III. Valuation and Timing
A. Valuation
1. Overview
Under sections 3.06(2) and 3.08(5) of
Notice 2023-2, the fair market value of
stock repurchased or issued (other than
stock issued or provided to an employee)
is the market price of the stock on the
date the stock is repurchased or issued,
respectively. Thus, if the price at which

Bulletin No. 2024–20

the repurchased stock is purchased differs
from the market price of the stock on the
date the stock is repurchased, the fair market value of the stock is the market price
on the date the stock is repurchased.
The Treasury Department and the
IRS continue to be of the view that this
approach is more consistent with the plain
language of the statute, and simpler for
the IRS to administer and for taxpayers to
apply, than an approach that defines fair
market value by reference to the amount
paid to repurchase stock. For example, under Notice 2023-2, adjustments
are not required for transaction costs or
non-arm’s-length transactions, and special rules are not needed for situations in
which stock is redeemed for consideration
other than cash (such as a non-publicly
traded note).
Section 3.08(3)(c) of Notice 2023-2
describes a special rule for valuing stock
issued or provided to employees. The
fair market value of such stock is the fair
market value of the stock, as determined
under section 83, as of the date the stock
is issued or provided to the employee, as
determined under section 3.08(3)(b) of
Notice 2023-2. See part XI.G.7 of this
Explanation of Provisions (discussion of
valuing stock issued or provided to an
employee or other service provider).
In section 6.01(2) of Notice 20232, the Treasury Department and the IRS
requested comments on whether the fair
market value of stock repurchased or
issued should be an amount other than
the market price of such stock. In section
6.01(6) of Notice 2023-2, the Treasury
Department and the IRS also requested
comments on whether a method should
be provided for determining the market
price of stock that is traded on multiple
established securities markets and, if so,
what modifications to the rules described
in sections 3.06(2)(a)(i) and 3.08(5)(a)
(i) of Notice 2023-2 (concerning acceptable methods for determining the market
price of repurchased or issued stock that is
traded on an established securities market)
would be required.
2. Valuation in Arm’s-Length
Transactions
Consistent with the approach described
in Notice 2023-2, stakeholders generally

Bulletin No. 2024–20

recommended that the fair market value of
stock repurchased or issued should be the
market price of the stock on the day of the
repurchase or issuance, respectively. However, one stakeholder also recommended
that covered corporations be required to
determine fair market value based on the
actual price the covered corporation pays
or receives, if the repurchase or issuance
is (i) from or to an unrelated party, (ii) for
cash or cash-equivalents, (iii) negotiated
at arm’s length, and (iv) not pursuant to
a pre-existing option contract or other
arrangement (for example, an accelerated
share repurchase agreement) that involves
the delivery of stock at a price other than
the stock’s market price at delivery.
Similarly, another stakeholder recommended an exception to the general fair
market value rule for repurchases that
result from a tender offer or other, similarly negotiated transaction that sets a
transaction price prior to the closing date.
According to the stakeholder, it is common for the transaction price and the market price on the closing date to differ, and
it is not clear why the value of a repurchase should be determined based on the
market price rather than the transaction
price.
The Treasury Department and the IRS
continue to be of the view that an approach
that references the market price of stock on
the date the stock is repurchased or issued,
respectively, is more consistent with the
plain language of the statute, and would
be simpler to administer, than an approach
that references the amount paid to repurchase the stock. Moreover, the Treasury
Department and the IRS are of the view
that the two approaches likely would
result in approximately similar values for
most repurchases of publicly traded stock.
Consequently, the proposed regulations
would provide that the fair market value
of stock repurchased or issued is the market price of the stock on the date the stock
is repurchased or issued, respectively. See
proposed §§58.4501-2(h)(1) and 58.45014(e)(1).
3. Valuation in Bankruptcy or Insolvency
Workouts
Another stakeholder recommended
that, in the case of a bankruptcy or insolvency workout, the fair market value of

1079

repurchased stock should equal the value
of the recovery shareholders are entitled or
permitted to receive under the bankruptcy
or insolvency workout, rather than the
market price of the stock. The stakeholder
recommended this approach because the
market price of the stock will take the debt
restructuring into account and, thus, may
be much higher than the recovery value.
However, the Treasury Department
and the IRS are of the view that the proposed regulations should not adopt special
valuation rules for financially troubled
companies. As discussed in part XIII of
this Explanation of Provisions, the Treasury Department and the IRS are of the
view that distributions of cash or other
non-qualifying property (that is, property
that is not permitted to be received under
section 354 or 355 of the Code without
the recognition of gain or loss) by troubled companies to their shareholders in
exchange for their stock should be subject
to the stock repurchase excise tax. Moreover, section 4501 contains no indication
that special valuation rules for financially
troubled companies would be necessary
or appropriate to carry out the purposes
of the stock repurchase excise tax. The
Treasury Department and the IRS are of
this view because the exchange would be
a section 317(b) redemption and providing a special rule would not be necessary
or appropriate to carry out the purposes of
section 4501.
4. Valuation of Publicly Traded Stock
a. In general
One stakeholder recommended that
taxpayers be permitted (but not required)
to determine the market price of publicly
traded stock based on one or more commonly accepted valuation methods, such
as daily volume-weighted average price
(VWAP), daily average high-low price, or
daily closing price. Under the stakeholder’s recommendation, a taxpayer would be
required to consistently apply the taxpayer’s chosen method to all its repurchases
and issuances throughout the taxpayer’s
taxable year. According to the stakeholder,
this approach would be consistent with
established Federal tax valuation standards for the fair market value of publicly
traded securities.

May 13, 2024

Sections 3.06(2)(a)(i) and 3.08(5)(a)
(i) of Notice 2023-2 describe an approach
that would require taxpayers to determine
the market price of repurchased or issued
stock, respectively, that is traded on an
established securities market by applying one of four methods: (i) the daily
volume-weighted average price as determined on the date the stock is repurchased
or issued; (ii) the closing price on the date
the stock is repurchased or issued; (iii) the
average of the high and low prices on the
date the stock is repurchased or issued;
and (iv) the trading price at the time
the stock is repurchased or issued. Sections 3.06(2)(a)(iii) and 3.08(5)(a)(iii) of
Notice 2023-2 describe an approach that
would require the market price of such
stock to be determined by consistently
applying one of the foregoing methods to
all repurchases and issuances throughout
the covered corporation’s taxable year
(other than stock issued to employees).
Another stakeholder expressed appreciation for the flexibility provided under the
approach described in sections 3.06(2)(a)
and 3.08(5)(a) of Notice 2023-2.
The Treasury Department and the IRS
agree that commonly accepted valuation
methods are an appropriate means of
determining the fair market value of publicly traded stock for purposes of repurchases and issuances under section 4501.
Accordingly, consistent with Notice 20232, the proposed regulations would include
four such methods: (i) daily VWAP; (ii)
daily closing price; (iii) daily average
high-low price; and (iv) trading price
when stock is repurchased or issued. Consistent with Notice 2023-2, to facilitate the
IRS’s ability to administer and enforce the
stock repurchase excise tax, the Treasury
Department and the IRS are of the view
that taxpayers should be required (rather
than merely permitted) to use one of these
methods. See proposed §§58.4501-2(h)(2)
(ii) and 58.4501-4(e)(2)(ii).
As reflected in sections 3.06(2)(a)(iii)
and 3.08(5)(a)(iii) of Notice 2023-2, the
Treasury Department and the IRS also
agree with the stakeholder that taxpayers
should be required to consistently apply
the chosen method to all repurchases and
issuances throughout the taxable year.
See proposed §§58.4501-2(h)(2)(iv) and
58.4501-4(e)(2)(iv). For special rules for
valuing stock issued or provided to an

May 13, 2024

employee or other service provider in connection with the performance of services,
see proposed §58.4501-4(e)(5) and part
XI.G.7 of this Explanation of Provisions.
b. Stock traded on multiple established
securities markets
One stakeholder recommended that
a covered corporation with a class of
stock that trades on multiple established
securities markets should be permitted to
select both the valuation method and the
exchange to be used in determining the
fair market value of the covered corporation’s stock. The stakeholder had considered an alternative approach based on the
market price of the shares on the exchange
with the highest trading volume on the
applicable date, but the stakeholder did
not recommend such an approach due to
the additional complexity it would create.
The Treasury Department and the
IRS are of the view that a covered corporation whose stock is traded on multiple exchanges should determine the fair
market value of the covered corporation’s stock by reference to trading on the
exchange in the country in which the covered corporation is organized, including
a regional established securities market
that trades in that country. If the covered
corporation’s stock trades on multiple
exchanges in the country in which the
covered corporation is organized, fair
market value is determined by reference
to trading on the exchange in that country with the highest trading volume in that
stock in the prior taxable year. See proposed §§58.4501-2(h)(2)(v) and 58.45014(e)(2)(v). It is the view of the Treasury
Department and the IRS that this approach
would better facilitate the IRS’s ability to
administer and enforce the stock repurchase excise tax and enable taxpayers to
apply the tax with greater certainty.
5. Valuation of Privately Owned Stock
One stakeholder recommended that
the market price of privately owned stock
should be determined under general valuation principles for privately owned
securities. Another stakeholder recommended that the market price of privately
owned stock should equal the amount paid
for such stock. According to this second

1080

stakeholder, valuation experts often disagree, and the transaction price typically
is viewed as the best evidence of the value
of privately owned stock. Further, allowing corporations to use the amount paid
in valuing privately traded stock would
relieve corporations from the need to evaluate whether there is a difference between
the amount paid and the market price of
such shares on the date on which ownership transfers for Federal income tax purposes.
Under the approach described in sections 3.06(2)(b) and 3.08(5)(b) of Notice
2023-2, stock that is not traded on an
established securities market would be
valued on the date of repurchase or issuance under the principles of §1.409A-1(b)
(5)(iv)(B)(1). Section 1.409A‑1(b)(5)(iv)
(B)(1) provides, in part, that the fair market value of stock as of a valuation date
means a value determined by the reasonable application of a reasonable valuation
method, and that the determination of
whether a valuation method is reasonable
(or whether an application of a valuation
method is reasonable) is made based on
the facts and circumstances as of the valuation date. Section 1.409A-1(b)(5)(iv)
(B)(1) further provides that the amount
paid is one factor to be considered under
a reasonable valuation method. The Treasury Department and the IRS are of the
view that the proposed regulations should
implement the approach described in
Notice 2023-2 and should not provide a
separate rule that would permit taxpayers
to use the amount paid, in and of itself, in
determining the value of privately traded
stock. See proposed §§58.4501-2(h)(3)
and 58.4501-4(e)(3). For special rules
for valuing stock issued or provided to an
employee or other service provider in connection with the performance of services,
see proposed §58.4501-4(e)(5) and part
XI.G.7 of this Explanation of Provisions.
As with publicly traded stock, the
Treasury Department and the IRS are of
the view that repurchases and issuances
of privately traded stock should be valued consistently. Specifically, the proposed regulations would provide that the
same valuation method must be used for
all repurchases and issuances of privately
owned stock belonging to the same class
throughout the covered corporation’s taxable year, unless the application of that

Bulletin No. 2024–20

method to a particular repurchase or issuance would be unreasonable under the
facts and circumstances as of the valuation
date. See proposed §§58.4501-2(h)(3)(ii)
and 58.4501-4(e)(3)(ii). For special rules
for valuing stock issued or provided to an
employee or other service provider in connection with the performance of services,
see proposed §58.4501-4(e)(5) and part
XI.G.7 of this Explanation of Provisions.
6. Annual Valuation Convention
A stakeholder also questioned whether
covered corporations should be permitted
to use an annual valuation convention to
determine a single, uniform value for all
repurchases and issuances during a taxable year. According to the stakeholder,
an annual valuation convention would
eliminate the distortive effects of stock
price volatility. In addition, such approach
would simplify netting because the use
of the same price for all repurchases and
issuances in the taxable year would allow
netting to be computed based on the number of shares repurchased versus issued.
However, the stakeholder also
acknowledged that converting the netting rule into such a “share count” rule
would be in tension with the statutory
requirement to value shares based on fair
market value. The stakeholder also noted
that volatility later in the year could cause
a covered corporation’s stock repurchase
excise tax liability to rise or fall dramatically after issuances or repurchases earlier
in the year, and that other Code provisions
typically do not allow values to be averaged over such a long period.
The Treasury Department and the IRS
agree with the stakeholder that adoption
of an annual valuation convention in the
proposed regulations would be inconsistent with the statutory requirement under
section 4501(c)(3) to value shares based
on fair market value. Accordingly, the
proposed regulations would not adopt the
stakeholder’s annual valuation convention.
B. Timing of issuances and repurchases
1. In General
The approach described in sections
3.06(1)(a) and 3.08(2) of Notice 2023-2

Bulletin No. 2024–20

generally provides that stock is treated
as repurchased or as issued or provided,
respectively, at the time at which ownership of the stock transfers for Federal
income tax purposes. In turn, the approach
described in sections 3.06(2) and 3.08(5)
of Notice 2023-2 provides that the fair
market value of stock repurchased or
issued is the market price of the stock on
the date the stock is repurchased or issued,
respectively.
One stakeholder recommended that,
consistent with the approach described in
section 3.08(2) of Notice 2023-2, stock
generally should be treated as issued for
purposes of the netting rule when tax ownership of the stock transfers to the recipient of the stock, rather than when the stock
is issued for corporate law or financial
statement purposes.
The Treasury Department and the
IRS agree with the stakeholder’s general
recommendation and continue to be of
the view that stock generally should be
treated as repurchased when tax ownership of the stock transfers to the covered
corporation or to the specified affiliate
(as appropriate). Therefore, the proposed
regulations generally would retain this
approach. See proposed §§58.4501‑2(g)
(1) and 58.4501-4(d)(1). For specific
timing rules applicable in particular situations, see proposed §58.4501-2(g)
(2), (3), and (4), and for special timing
rules for stock issued or provided to an
employee or other service provider in
connection with the performance of services, see proposed §58.4501-4(d)(2) and
part XI.G.6 of this Explanation of Provisions.
2. Repurchase Pursuant to an
Economically Similar Transaction
Under the rule described in section
3.06(1)(b) of Notice 2023-2, stock
repurchased in an economically similar transaction is treated as repurchased
when the shareholders of the covered
corporation exchange their stock in the
covered corporation. Consistent with
part III.B.1 of this Explanation of Provisions and section 3.06(1)(b) of Notice
2023-2, the proposed regulations
would provide that stock repurchased
in an economically similar transaction
described in proposed §58.4501‑2(e)

1081

(4) is treated as repurchased on the date
the shareholders of the covered corporation exchange their stock in such corporation. See proposed §58.4501-2(g)
(2).
3. Repurchase Pursuant to a Constructive
Specified Affiliate Acquisition
For a discussion of the timing rule for
repurchases pursuant to a constructive
specified affiliate acquisition, see part
XIV.D of this Explanation of Provisions.
4. Accelerated Share Repurchase
Agreements
Although Notice 2023-2 does not
describe special rules for accelerated
share repurchase (ASR) agreements,
section 3.09(15), Example 15, of Notice
2023-2 illustrates the application of the
timing rules summarized in part III.B.1
of this Explanation of Provisions in
the context of an ASR agreement. That
example explicitly is limited to situations in which, based on the terms of
the agreement and the facts and circumstances, the date on which shares are
delivered by the bank to the covered
corporation is the date on which tax
ownership of the shares is transferred
for Federal income tax purposes. As a
result, the delivery date in the example is the repurchase date. The example illustrates the general principle that
the date on which tax ownership of the
shares is transferred for Federal income
tax purposes, which is generally based
on the particular ASR agreement and the
facts and circumstances of a transaction,
is the repurchase date.
Several
stakeholders
requested
guidance regarding the treatment of
ASR agreements for purposes of the
stock repurchase excise tax. In an ASR
agreement, a corporation that wants
to repurchase its outstanding shares
from the market will make an initial
cash payment to an investment bank
in exchange for a certain number of
shares. To deliver the shares to the corporation, (i) the investment bank first
will borrow shares from stock lenders, and then (ii) over the term of the
ASR agreement, the bank will purchase
shares from the market and use such

May 13, 2024

shares to gradually return the stock
owed to the stock lenders.
The price the corporation ultimately
pays for its shares under the ASR agreement generally is based on an averaging
of the VWAP of the shares on specified
days over the term of the agreement.
Upon final settlement of the agreement,
the bank may be required to deliver additional shares or cash to the corporation,
or the corporation may owe additional
purchase price to the bank, depending on
the VWAP of the shares over the term of
the agreement.
Several stakeholders recommended
treating the initial delivery of shares by
the bank to a covered corporation under
an ASR agreement as a repurchase at the
time of delivery, rather than at the time
the bank purchases the shares from the
market. Based on the plain language of
section 4501(a), one stakeholder also
recommended determining the amount
of the repurchase by reference to the fair
market value of the shares delivered on
the date of delivery, rather than by reference to the initial payment amount under
the ASR agreement. If the bank delivers
additional shares to the covered corporation (or the covered corporation issues
shares to the bank) upon final settlement
of the ASR agreement, the stakeholder
recommended that such delivery (or
issuance) also should be considered as a
repurchase (or an issuance) of shares for
purposes of the stock repurchase excise
tax, with the fair market value of the
repurchase (or issuance) determined on
that date.
The stakeholders’ recommendations
are consistent with Notice 2023-2, including section 3.09(15), Example 15, to the
extent that the ASR agreement involved
is one in which the date the shares are
delivered by the bank to the covered corporation is the date on which tax ownership of shares is transferred for Federal
income tax purposes. In such a situation,
the date the shares are delivered would
be the repurchase date. However, because
the determination of the date on which tax
ownership of shares is transferred is an
inherently factual question, the Treasury
Department and the IRS are of the view
that no special rule should be included in
the proposed regulations to determine the
repurchase date for ASR agreements, and

May 13, 2024

the proposed regulations would retain the
approach described in Notice 2023-2. See
proposed §§58.4501-2(h)(1), 58.45014(e)(1), and 58.4501-5(b)(15) (Example
15).
5. Other Forward Contracts
A stakeholder also requested guidance on how the stock repurchase excise
tax applies to other forward transactions
(either variable or fixed price) in which a
corporation agrees to acquire or issue its
stock for delivery in a future trade. The
stakeholder recommended that the stock
repurchase excise tax and the netting
rule generally should be applied based on
the fair market value of the shares at the
time of their actual acquisition or issuance by the corporation. However, if the
stock underlying the transaction is treated
as immediately acquired or issued under
Federal income tax principles (for example, if the corporation effectively acquires
the benefits and burdens of stock ownership upon entering into the forward contract), the timing rules for purposes of the
stock repurchase excise tax (for example,
the date used for determining fair market
value) should follow those Federal income
tax principles.
The Treasury Department and the IRS
agree with these recommendations as they
relate to the determination of the date
stock is treated as repurchased and the
fair market value of that stock. As previously discussed, the proposed regulations
generally would use Federal income tax
principles to determine the date on which
stock is treated as repurchased or issued.
Additionally, under the proposed regulations, the fair market value of stock repurchased or issued generally would equal
the market price of the stock on the date
the stock is repurchased or issued. See
proposed §§58.4501-2(h)(1) and 58.45014(e)(1). For a discussion of the application
of the netting rule to forward contracts or
other instruments not in the legal form of
stock, see part XI.C.9 of this Explanation
of Provisions.
6. Stock Issued or Provided to an
Employee or Other Service Provider
For a discussion of the timing rules for
stock issued or provided to an employee

1082

or other service provider, see part XI.G.6
of this Explanation of Provisions.
IV. Definitions of “Covered
Corporation,” “Established Securities
Market,” and “Specified Affiliate”
A. Becoming or ceasing to be a covered
corporation
1. Overview
In section 6.02(2) of Notice 20232, the Treasury Department and the IRS
requested comments on when a corporation should be treated as becoming or
ceasing to be a covered corporation, and
how repurchases and issuances by a corporation during a taxable year that are
prior to the date the corporation becomes
a covered corporation or after the date the
corporation ceases to be a covered corporation should be treated. For example, the
Treasury Department and the IRS have
considered the extent to which the term
“covered corporation” should apply to a
privately held corporation that goes public, or to a publicly traded corporation that
goes private, during a taxable year.
One stakeholder recommended that
the stock repurchase excise tax base of a
corporation that becomes a covered corporation during its taxable year (for example, because of an initial public offering
(IPO)) should be increased only for section 317(b) redemptions and economically
similar transactions occurring on or after
the date the corporation becomes a covered corporation. The stakeholder further
recommended that only stock issued by a
corporation on or after the date it becomes
a covered corporation should be taken into
account for purposes of the netting rule.
Similarly, another stakeholder recommended that a corporation’s status as a
covered corporation should be determined
immediately prior to a repurchase transaction. Thus, for example, a public corporation that becomes a private corporation in
a repurchase would be a covered corporation with respect to that transaction.
In contrast, another stakeholder recommended that any redemption that occurs
as part of a transaction should be exempt
from the definition of “repurchase” if the
corporation’s stock no longer is traded on
an established securities market immedi-

Bulletin No. 2024–20

ately after the transaction. Alternatively,
the stakeholder recommended that a corporation’s status as a covered corporation
be determined at the end of the repurchase
transaction.
2. General Rules
The Treasury Department and the IRS
are of the view that, as a general rule, a
corporation should be treated as a covered corporation starting at the beginning
of the corporation’s “initiation date,”
which is the date on which stock of the
corporation begins to be traded on an
established securities market. Based
on the statutory language, the Treasury
Department and the IRS are of the view
that the traded instrument must be stock
of the corporation (as opposed to, for
example, “when-issued” trading of interests in to-be-issued shares of stock of the
corporation). See, for example, section
4501(b) (defining a covered corporation
as a domestic corporation the stock of
which is traded on an established securities market). A covered corporation
generally would cease being treated as
a covered corporation at the end of the
covered corporation’s “cessation date,”
which is the date on which stock of the
covered corporation ceases to be traded
on an established securities market.
The Treasury Department and the IRS
are of the view that these general rules
would be consistent with the statutory language in section 4501 and would facilitate
the IRS’s ability to administer and enforce
the stock repurchase excise tax. Accordingly, the proposed regulations would
incorporate these general rules. See proposed §58.4501‑2(d)(1) and (d)(2)(i).
Under the proposed regulations, in the
case of a privately held domestic corporation that goes public, shares issued on or
after the initiation date would be counted
for purposes of the netting rule under the
proposed regulations. In addition, the proposed regulations would provide that any
repurchases, issuances, or contributions
to an employer-sponsored retirement plan
on or after that date would be taken into
account in computing the corporation’s
stock repurchase excise tax base for that
taxable year. In contrast, shares issued
before the initiation date would not be
counted for purposes of the netting rule,

Bulletin No. 2024–20

and any repurchases, issuances, or contributions to an employer-sponsored retirement plan before that date would not be
taken into account in computing the corporation’s stock repurchase excise tax
base for that taxable year. See proposed
§58.4501-4(b)(2).
In the case of a publicly traded domestic corporation that goes private, repurchases of stock on the cessation date
would be subject to the stock repurchase
excise tax under the proposed regulations, unless one of the statutory exceptions applies. However, any repurchases,
issuances, or contributions to an employer-sponsored retirement plan of the corporation’s stock after that date generally
would not be taken into account under the
proposed regulations in computing the
corporation’s stock repurchase excise tax
base for that year.
3. Exception Regarding Cessation
Transactions That Include Repurchases
Pursuant to the Transaction’s Plan
The proposed regulations would contain an exception to the general rule that
a corporation should be treated as a covered corporation starting at the beginning
of its “initiation date” and ending at the
end of its “cessation date.” Under the proposed regulations, if a corporation ceases
to be a covered corporation pursuant to a
plan that includes a repurchase, and if the
corporation’s cessation date precedes the
date on which any repurchase undertaken
pursuant to the plan occurs, then the corporation would continue to be a covered
corporation until the end of the date on
which the repurchase occurs. See proposed §58.4501-2(d)(2)(ii). For example,
under the proposed regulations, all repurchases of stock of a target covered corporation in an acquisitive reorganization
would be subject to the stock repurchase
excise tax (if no exception applied), even
if the target covered corporation’s stock
ceased to be traded on an established
securities market prior to the repurchase
of the target covered corporation’s stock
in the acquisitive reorganization. Under
this exception, a covered corporation’s
final repurchase transaction pursuant
to the plan of reorganization would be
included in the stock repurchase excise
tax base.

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4. Inbound and Outbound F
Reorganizations
A stakeholder requested clarification
that, consistent with the Federal income
tax treatment of a foreign corporation that
domesticates in an F reorganization, such
a corporation is not a domestic corporation for purposes of the stock repurchase
excise tax until the day after that reorganization occurs. See §1.367(b)-2(f)(4) (providing that, in the case of an F reorganization in which the transferor corporation
is a foreign corporation, the taxable year
of such corporation ends with the close of
the date of the transfer). According to the
stakeholder, this clarification is important
for foreign special acquisition holding
companies, which typically domesticate
when combining with a domestic business.
The Treasury Department and the IRS
agree with the stakeholder. Accordingly,
these proposed regulations would clarify
that, for purposes of the stock repurchase
excise tax, a foreign corporation that
transfers its assets to a domestic corporation in an F reorganization (as described in
§1.367(b)-2(f)) is not treated as a domestic corporation until the day after the reorganization. Similarly, the proposed regulations would clarify that, for purposes of
the stock repurchase excise tax, a domestic corporation that transfers its assets to
a foreign corporation in an F reorganization (as described in §1.367(a)-1(e)) is not
treated as a foreign corporation until the
day after the reorganization. See proposed
§58.4501-2(d)(3).
5. Determination of Timing of Events or
Transactions
The Treasury Department and the IRS
have considered rules to address uncertainty that could arise from the application
of the stock repurchase excise tax regulations to a series of transactions or events
that occurs across multiple time zones.
The Treasury Department and the IRS
request comments on this issue, including
specific proposals to address the application of the stock repurchase excise tax
regulations to a series of transactions or
events that occurs across multiple time
zones. The Treasury Department and
the IRS encourage comments regarding

May 13, 2024

the extent to which a proposed approach
would facilitate taxpayer certainty and the
IRS’s ability to administer and enforce the
stock repurchase excise tax regulations.
B. Determining specified affiliate status
If a specified affiliate of a covered corporation acquires stock of the covered
corporation from a person that is not the
covered corporation or another specified
affiliate of the covered corporation, the
acquisition is treated as a repurchase of
the stock of the covered corporation by the
covered corporation. See section 4501(c)
(2)(A); see also section 3.05(1) of Notice
2023-2.
Stakeholders have asked when specified affiliate status should be determined.
More specifically, stakeholders have asked
when valuations should be undertaken for
purposes of the 50-percent vote-or-value
test in section 4501(c)(2)(B), and whether
fluctuations in the value of the (potential)
specified affiliate’s stock or partnership
interests should be ignored.
The Treasury Department and the IRS
are of the view that the determination of
whether a corporation or partnership is a
specified affiliate should be made whenever such determination is relevant for
purposes of section 4501. For example,
such a determination would be relevant
when the potential specified affiliate
acquires stock of a covered corporation or
provides stock of the covered corporation
to employees of the potential specified
affiliate. See proposed §58.4501-2(f)(2)
(i).
C. Involvement safe harbor
As defined in section 4501(b), the term
“covered corporation” means any domestic corporation the stock of which is traded
on an established securities market (within
the meaning of section 7704(b)(1)). The
rule described in section 3.02(13) of
Notice 2023-2 further provides that the
term “established securities” market has
the meaning provided in §1.7704-1(b).
Section 1.7704-1(b) provides, in part,
that the term “established securities market” includes “[a]n interdealer quotation
system that regularly disseminates firm
buy or sell quotations by identified brokers or dealers by electronic means or oth-

May 13, 2024

erwise” (interdealer system). See §1.77041(b)(5). However, §1.7704-1(d) provides
a safe harbor (involvement safe harbor)
under which interests in a partnership are
not treated as traded on an established
securities market within the meaning of
§1.7704-1(b)(5) (that is, a partnership will
not be a publicly traded partnership solely
due to an interdealer system), unless the
partnership either (1) “participates in the
establishment of the market or the inclusion of its interests thereon,” or (2) “recognizes any transfers made on the market”
by redeeming the transferor or admitting
the transferee as a partner or otherwise
recognizing any rights of the transferee.
A stakeholder noted that shares of
corporations may trade over the counter
(OTC) or on similar markets, even without
the corporation’s involvement, and that
certain of those OTC or similar markets
may qualify as an interdealer system. As
a result, a corporation could be a covered
corporation due to independent shareholder actions without the corporation
engaging in an affirmative listing on an
exchange. The stakeholder requested confirmation that the involvement safe harbor in §1.7704-1(d) applies for purposes
of determining whether a corporation is a
covered corporation due to an interdealer
system, with adjustments as needed for
application of this safe harbor to corporations rather than partnerships.
The Treasury Department and the IRS
are of the view that the involvement safe
harbor should not apply for purposes of
the stock repurchase excise tax. The Treasury Department and the IRS view the
relationship between a partnership and its
partners (a contractual relationship that
allows a partnership to set the terms under
which interests in the partnership may be
validly transferred) as different from the
relationship between a corporation and
its shareholders (which is determined by
the corporate law governing the stock).
Accordingly, the proposed regulations
would not incorporate the involvement
safe harbor.
D. Indirect ownership of specified
affiliates
As noted in part I.B of the Background
section of this preamble, section 4501(c)
(2)(B) defines the term “specified affil-

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iate” to mean, with regard to any corporation, “(i) any corporation more than 50
percent of the stock of which is owned (by
vote or by value), directly or indirectly, by
such corporation, and (ii) any partnership
more than 50 percent of the capital interests or profits interests of which is held,
directly or indirectly, by such corporation” (emphasis added).
The proposed regulations would provide that, for purposes of section 4501(c)
(2)(B), “indirect” ownership means a
corporation’s proportionate ownership in
equity interests through other entities. See
proposed §58.4501-2(f)(2)(ii). For example, if P owns 60 percent of the stock of
Sub 1, which owns 60 percent of the stock
of Sub 2, then P indirectly owns 36 percent (0.6 x 0.6 = 0.36) of the stock of Sub
2.
E. Foreign securities markets
In section 6.02(9) of Notice 20232, the Treasury Department and the IRS
requested comments on whether the definition of “established securities market”
should be revised to clarify the regulatory requirements under the Securities
Exchange Act of 1934 that are most relevant to the determination of whether a
foreign securities market is treated as an
established securities market and, if so,
what type of U.S. securities exchange
(including which tier of a securities
exchange with multiple tiers) should be
the baseline for comparison.
One stakeholder recommended including an exclusive list of foreign securities
markets that are treated as established
securities markets, on the grounds that tax
advisors should not be required to determine whether foreign securities markets
have regulatory requirements analogous
to those under the Securities Exchange
Act of 1934. See §1.7704-1(b).
The Treasury Department and the IRS
appreciate the stakeholder’s recommendation. However, the Treasury Department
and the IRS are of the view that the development and maintenance of an exclusive
list of foreign securities markets that are
treated as established securities markets
would be outside the scope of the proposed regulations. As a result, the proposed regulations would not include such
a list.

Bulletin No. 2024–20

F. Depository receipts
In section 6.02(10) of Notice 20232, the Treasury Department and the IRS
requested comments on how the trading of
stock through depository receipts should
be treated for purposes of determining
whether a corporation is a covered corporation or whether repurchased stock is
traded on an established securities market.
In response, one stakeholder noted that
some applicable foreign corporations with
domestic specified affiliates have American depository receipts (ADRs) listed
in the United States. The stakeholder
requested guidance to clarify that the foreign parent’s ADRs would not cause the
domestic specified affiliate to be treated as
if the domestic specified affiliate’s stock
were traded on an established securities
market in the United States.
The Treasury Department and the IRS
are of the view that no special rules are
needed in response to this request. Section
4501(b) specifically defines the term “covered corporation” to mean “any domestic
corporation the stock of which is traded on
an established securities market” (emphasis added). Moreover, although Notice
2023-2 does not expressly address ADRs,
the definition of “stock” is defined with
respect to an instrument issued by the corporation. See section 3.02(25) of Notice
2023-2. The proposed regulations would
maintain this definition of “stock.” See
proposed §58.4501‑1(b)(29).
ADRs that provide full voting rights
with respect to the underlying corporate
stock, entitle ADR holders to receive any
dividends paid on the stock, and permit an
ADR holder to surrender an ADR at any
time in exchange for the underlying stock,
may be treated as direct ownership of the
underlying stock. See Rev. Rul. 65-218,
1965-2 C.B. 566. If an ADR is not treated
as direct ownership of the underlying
stock, it would be characterized in accordance with its substance. In either case,
because ADRs are not issued by a domestic specified affiliate, they would not be
treated as stock of the domestic specified
affiliate.
Publicly available information indicates that many foreign issuers treat ADRs
for Federal income tax purposes as direct
ownership of their stock. On that basis,
under the definition of “stock” in these

Bulletin No. 2024–20

proposed regulations, ADRs would be
treated as stock of the issuer and would
be relevant to determining whether the
issuer has stock that is traded on an established securities market. Similarly, global
depositary receipts (GDRs) for the stock
of domestic corporations that are traded
on foreign exchanges may be relevant in
determining whether the issuer has stock
that is traded on an established securities
market. Because the ADRs and GDRs are
not issued by a domestic specified affiliate, they would not be treated as stock of
the domestic specified affiliate.
Additionally, Congress specifically
wrote rules to address situations involving a publicly traded foreign corporation
with a domestic specified affiliate, and
those rules do not include any provisions
treating the domestic specified affiliate as
publicly traded as a result of the foreign
corporation’s stock trading on an established securities market in the United
States. See section 4501(d); see also part
XVI of this Explanation of Provisions
(discussion of feedback relating to section 4501(d)).
V. Section 301 Distributions
Section 301(a) of the Code generally
provides that a distribution of property (as
defined in section 317(a)) made by a corporation to a shareholder with respect to
its stock is treated in the manner provided
in section 301(c). Section 301(c)(1) provides that the portion of the distribution
that is a dividend (as defined in section
316) is included in gross income. Section 301(c)(2) provides that the portion
of the distribution that is not a dividend is
applied against and reduces the adjusted
basis of the stock. Section 301(c)(3) generally provides that the portion of the distribution that is not a dividend is treated as
gain from the sale or exchange of property
to the extent that it exceeds the adjusted
basis of the stock.
For purposes of this discussion, an
actual distribution subject to section
301(c)(2) or (3) refers to a distribution
of property to a shareholder with respect
to the corporation’s stock that does not
include an exchange of such stock. In contrast, an “in-form” redemption treated as a
distribution subject to section 301(c)(2) or
(3) refers to a distribution of property to a

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shareholder in exchange for the corporation’s stock.
A. Actual distributions subject to section
301(c)(2) or (3)
Stakeholders asked whether an actual
distribution (that is, a distribution that
does not involve a redemption in form)
to which section 301(c)(2) or (3) applies
is subject to the stock repurchase excise
tax. Stakeholders contended that the stock
repurchase excise tax should not apply
to such a distribution, because (i) it is
not a section 317(b) redemption, and (ii)
it is not economically similar to a section 317(b) redemption (for example, it
does not decrease the number of shares
outstanding). Instead, such a distribution
more closely resembles a dividend, which
is excluded from the stock repurchase
excise tax (see section 4501(e)(6)).
The Treasury Department and the IRS
agree that an actual distribution subject
to section 301(c)(2) or (3) is not a repurchase (and, therefore, is not subject to the
stock repurchase excise tax) because such
a distribution is neither a section 317(b)
redemption nor economically similar to
such a redemption. Accordingly, and consistent with section 3.04(4)(a) of Notice
2023-2 (which does not include such distributions in the list of economically similar transactions), the proposed regulations
would provide that an actual distribution
subject to section 301(c)(2) or (3) is not
subject to the stock repurchase excise tax.
See proposed §58.4501-2(e)(5)(iv).
B. Redemptions treated as distributions
subject to section 301(c)(2) or (3)
Stakeholders also asked whether the
stock repurchase excise tax applies to an
in-form redemption that is treated as a
distribution to which section 301(c)(2)
or (3) applies. See section 302(d). One
stakeholder recommended applying the
stock repurchase excise tax to a non-pro
rata, in-form redemption that is treated as
a distribution to which section 301(c)(2)
or (3) applies. However, the stakeholder
contended that the stock repurchase excise
tax should not apply to a pro rata, in-form
redemption that is treated as a distribution
to which section 301(c)(2) or (3) applies,
because such a redemption is more akin to

May 13, 2024

an actual section 301 distribution than a
typical section 317(b) redemption. In contrast, another stakeholder recommended
that the stock repurchase excise tax should
apply to such a transaction because it is
a redemption within the meaning of section 317(b) (for example, such a redemption decreases the number of outstanding
shares even though the redemption is pro
rata).
The Treasury Department and the
IRS agree that an in-form section 317(b)
redemption treated as a distribution to
which section 301(c)(2) or (3) applies is
a repurchase based on the plain language
of the statute, regardless of whether the
redemption is pro rata. Accordingly, and
consistent with section 3.04(3) of Notice
2023‑2 (which does not include such
transactions in the list of section 317(b)
redemptions that are not repurchases),
an in-form section 317(b) redemption
treated as a distribution to which section
301(c)(2) or (3) applies would be subject
to the stock repurchase excise tax under
the proposed regulations. See proposed
§58.4501-2(e)(3) (providing an exclusive
list of section 317(b) redemptions that are
not repurchases).
C. Exclusion for pro rata distributions
One stakeholder recommended a general exclusion from the stock repurchase
excise tax for distributions made to all
shareholders of a covered corporation on
a wholly pro rata basis (100 percent pro
rata distribution), regardless of whether
such distributions involve a redemption in
form. According to the stakeholder, such
distributions do not implicate most of the
policy considerations underlying the tax.
However, the stakeholder noted that
adopting this recommendation would
require the Treasury Department and
the IRS to consider (i) how to determine
whether a distribution is 100 percent pro
rata if the covered corporation has multiple classes of stock, and (ii) the impact of
such distributions on options or convertible debt instruments (to the extent such
instruments thereby accrete their proportionate interests in the covered corporation).
The Treasury Department and the IRS
disagree with the stakeholder’s recommendation. A redemptive 100 percent pro

May 13, 2024

rata distribution is a repurchase because
the distribution (i) constitutes a section
317(b) redemption or (ii) is an economically similar transaction. Accordingly, the
proposed regulations would not provide
an exclusion for 100 percent pro rata distributions, except in the case of pro rata
distributions in a complete liquidation to
which section 331 or 332 (but not both)
applies.
VI. Complete and Partial Liquidations
A. Complete liquidations
Section 331(a) of the Code provides
that amounts received by a shareholder
in a distribution in complete liquidation
of a corporation are treated as in full payment in exchange for the stock. Section
332 of the Code provides an exception to
the general rule in section 331(a). If the
requirements of section 332 are met, no
gain or loss is recognized upon the receipt
by one corporation of property distributed
in complete liquidation of another corporation.
Section 332 applies only if the corporation receiving property in the liquidation satisfies the requirements of section
332(b), including the requirement that the
corporation own stock in the liquidating
corporation meeting the 80-percent voting
and value requirements of section 1504(a)
(2) of the Code (80-percent distributee).
See section 332(b)(1).
1. Application of Stock Repurchase
Excise Tax
Several stakeholders recommended
that a complete liquidation by a covered
corporation should not be subject to the
stock repurchase excise tax because the
complete liquidation terminates the covered corporation’s existence. For support,
these stakeholders contended that a complete liquidation provides no opportunity
for the liquidating corporation to reinvest
cash in the corporation’s enterprise, which
stakeholders stated Congress may have
intended to encourage through the enactment of section 4501. In addition, these
stakeholders emphasized that a complete
liquidation provides no opportunity for
a covered corporation to manipulate the
corporation’s earnings per share (EPS)

1086

or other similar metrics, which these
stakeholders stated Congress may have
intended to discourage through the enactment of section 4501.
As reflected in section 3.04(4)(b)(i)(A)
of Notice 2023-2, the Treasury Department and the IRS are of the view that a
distribution in complete liquidation of a
covered corporation to which either section 331 or 332 (but not both) applies is
not a repurchase. Accordingly, the Treasury Department and the IRS are of the
view that such distributions should not be
subject to the stock repurchase excise tax.
See proposed §58.4501-2(e)(5).
2. Determination of Complete
Liquidation or Dissolution
Stakeholders also asked whether a distribution is in “complete liquidation” of a
corporation for purposes of section 331
if some classes of the liquidating corporation’s stock do not receive a distribution. Section 331 does not define the term
“complete liquidation.” Instead, this term
is defined in section 346(a) of the Code,
which provides that, for purposes of subchapter C of chapter 1, “a distribution
shall be treated as in complete liquidation
of a corporation if the distribution is one
of a series of distributions in redemption
of all of the stock of the corporation pursuant to a plan” (emphasis added).
Stakeholders have questioned whether
the definition of “complete liquidation” in
section 346(a) requires a distribution on all
classes of stock in order for a dissolution
of a corporation to qualify as a distribution
in complete liquidation to which section
331 applies. These stakeholders based
their question on the language of section
332(b)(2), which provides that a distribution is considered in “complete liquidation” within the meaning of section 332
only if “the distribution is by [the liquidating corporation] in complete cancellation
or redemption of all its stock.” In addition, these stakeholders referenced Treasury regulations and judicial opinions. See
§1.332-2(b) (“Section 332 applies only to
those cases in which the recipient corporation receives at least partial payment for
the stock which it owns in the liquidating
corporation.”); Spaulding Bakeries Inc. v.
Comm’r, 252 F.2d 693, 697 (2d Cir. 1958)
(emphasizing that “[s]ection 112(b)(6)(C)

Bulletin No. 2024–20

[of the Internal Revenue Code of 1939
(the predecessor statute to section 332)]
requires for its application a distribution
in complete cancellation or redemption of
all stock of the dissolved corporation”),
aff’g 27 T.C. 684 (1957); H.K. Porter Co.
v. Comm’r, 87 T.C. 689 (1986) (agreeing
with the rationale of the Second Circuit’s
decision in H.K. Porter and holding that
section 332 did not apply to a dissolution
because a distribution was made on the
dissolving corporation’s preferred stock
but not its common stock).
As stated previously, the Treasury
Department and the IRS are of the view
that a distribution in complete liquidation
of a covered corporation to which section 331 or 332(a) applies should not be
treated as a repurchase. In addition, the
Treasury Department and the IRS are of
the view that a redemption by a covered
corporation pursuant to a corporate dissolution of the covered corporation should
not be treated as a repurchase. To clarify
the intent of Notice 2023-2, the proposed
regulations would provide that a distribution in complete liquidation of a covered
corporation to which either section 331
or 332(a) (but not both) applies, a distribution pursuant to a plan of dissolution
of a covered corporation that is reported
on the original (but not a supplemented or
an amended) IRS Form 966, Corporate
Dissolution or Liquidation (or any successor form), or a distribution pursuant
to a deemed dissolution of the covered
corporation (for instance, pursuant to a
deemed liquidation under §301.7701-3),
is not a repurchase and, therefore, is not
subject to the stock repurchase excise tax.
See proposed §58.4501-2(e)(5)(i). For the
treatment of liquidations to which both
sections 331 and 332 apply, see proposed
§58.4501-2(e)(4)(v)(A) and the discussion in part VI.A.3 of this Explanation of
Provisions.
3. Liquidations to Which Both Sections
331 and 332 Apply
The rules described in section 3.04(4)
(a)(v) of Notice 2023-2 provide that, if
sections 331 and 332 both apply to a complete liquidation, then (i) the distribution
to the 80-percent distributee is not subject
to the stock repurchase excise tax, but (ii)
each distribution to which section 331

Bulletin No. 2024–20

applies (that is, the surrender of covered
corporation stock by each minority shareholder) is subject to the stock repurchase
excise tax. The Treasury Department and
the IRS have arrived at this view because
the 80-percent distributee is the successor to the transferor corporation (that
is, the liquidating subsidiary) following
the complete liquidation to which section 332 applies. See section 381(a)(2).
In contrast to the 80-percent distributee,
minority shareholders that receive liquidating distributions to which section 331
applies terminate their investment in the
transferor corporation’s business (that is,
are not successors to the transferor corporation).
Moreover, a complete liquidation to
which sections 331 and 332 both apply is
substantively similar to an upstream reorganization of the liquidating subsidiary
into the 80-percent distributee in which
the minority shareholders receive only
non-qualifying property in exchange for
their stock in the liquidating subsidiary.
Because such an exchange in an upstream
reorganization would constitute a “repurchase” under the proposed regulations,
the Treasury Department and the IRS
are of the view that the same treatment
should apply to liquidating distributions
to minority shareholders subject to section 331. See proposed §58.4501-2(e)(4)
(v)(A).
4. Distributions During Taxable Year of
Complete Liquidation or Dissolution
The rule described in section 3.04(4)
(b)(i)(B) of Notice 2023-2 provides that,
if a covered corporation or a covered surrogate foreign corporation (as appropriate) completely liquidates and dissolves
(within the meaning of §1.331-1(d)(1)(ii))
during a taxable year, no distribution by
that corporation during that taxable year is
a repurchase. See also proposed §58.45012(e)(5)(ii) (incorporating this provision
into the proposed regulations). Stakeholders have requested clarification regarding how this provision interacts with the
rule described in section 3.04(4)(a)(v) of
Notice 2023-2, which (as previously discussed in part VI.A.3 of this Explanation
of Provisions) provides that, in a complete
liquidation to which sections 331 and 332
both apply, each distribution to which

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section 331 applies is subject to the stock
repurchase excise tax. The proposed regulations would clarify the intent of Notice
2023-2 by providing that the rule in proposed §58.4501-2(e)(5)(ii) does not apply
if the complete liquidation or dissolution
is a transaction to which sections 331 and
332 both apply.
B. Partial liquidations
Section 302(b)(4) of the Code provides that a distribution in redemption of
stock held by a shareholder who is not
a corporation and in partial liquidation
of the distributing corporation receives
exchange treatment under section 302(a).
For purposes of section 302(b)(4), a distribution will be treated as in partial liquidation of a corporation if the distribution (i) is not essentially equivalent to a
dividend (determined at the corporate
level rather than at the shareholder level),
and (ii) is pursuant to a plan and occurs
within the taxable year in which the plan
was adopted or within the succeeding taxable year. See section 302(e)(1). A partial
liquidation may involve a redemption of
stock under section 317(b) in which the
shareholder actually, in-form surrenders
stock of the corporation in exchange for
property (redemptive partial liquidation).
A partial liquidation also may involve a
constructive redemption of stock in which
the shareholder is deemed to surrender
stock of the corporation in exchange for
property, and that deemed surrender satisfies the redemption requirement of sections 302 and 317(b) (constructive partial
liquidation). See H.R. Conf. Rep. No. 760,
97th Cong., 2nd Sess. 530 (1982) (“Under
present law, a distribution in partial liquidation may take place without an actual
surrender of stock by the shareholders …
[and a] constructive redemption of stock
is deemed to occur in such transactions….
The conferees intend that the treatment
of partial liquidations under present law
section 346(a)(2) and (b) is to continue
for such transactions under new section
302(e).”).
1. Partial Liquidations Involving an
Actual Redemption of Stock
Several stakeholders requested guidance on whether a redemptive partial liq-

May 13, 2024

uidation is treated as a repurchase. One
stakeholder recommended that a redemptive partial liquidation by a covered corporation should

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Source: Frix Law Library, https://www.frixlaw.com/law-library/documents/agency%3Airs%3A1eb796ffbd35a6d5. Public record. Not legal advice.