Excise tax on stock repurchases.

(a) Excise tax imposed. Section 4501(a) of the Code imposes a stock repurchase excise tax on each covered corporation equal to the applicable percentage of the fair market value of any stock of the corporation that is repurchased by the corporation during the taxable year. This section and § 58.4501-2 provide generally applicable definitions and operating rules regarding the application of the stock repurchase excise tax and the computation of the stock repurchase excise tax liability of a covered corporation. Section 58.4501-3 provides rules regarding the application of the exceptions in section 4501(e) (other than the de minimis exception described in section 4501(e)(3), which is addressed in § 58.4501-2(b)(2)) and related exceptions. Section 58.4501-4 provides rules regarding the application of section 4501(c)(3). Section 58.4501-5 provides examples that illustrate the application of section 4501 and the stock repurchase excise tax regulations. Section 58.4501-6 provides applicability dates for the stock repurchase excise tax regulations (other than § 58.4501-7). For special rules and examples regarding the application of section 4501(d) to acquisitions or repurchases of stock of certain foreign corporations, see § 58.4501-7. (b) Definitions. The following definitions apply for purposes of this section and §§ 58.4501-2 through 58.4501-6, and, to the extent provided in § 58.4501-7(b), for purposes of § 58.4501-7: (1) Acquisitive reorganization. The term acquisitive reorganization means a transaction that qualifies as a reorganization under— (i) Section 368(a)(1)(A) of the Code, including by reason of section 368(a)(2)(D) or (a)(2)(E); (ii) Section 368(a)(1)(C); (iii) Section 368(a)(1)(D), if the reorganization satisfies the requirements of section 354(b)(1) of the Code; or (iv) Section 368(a)(1)(G), if the reorganization satisfies the requirements of section 354(b)(1). (2) Applicable percentage. The term applicable percentage means the percentage provided in section 4501(a). (3) Cessation date. The term cessation date means the date on which all stock of a covered corporation ceases to be traded on an established securities market. (4) Clawback. The term clawback means a surrender of stock pursuant to a contractual provision that requires an employee to return vested stock. (5) Code. The term Code means the Internal Revenue Code. (6) Controlled corporation. The term controlled corporation has the meaning given the term in section 355(a)(1)(A) of the Code. (7) Covered corporation. The term covered corporation means any domestic corporation (including within the meaning of paragraph (d) of this section) the stock of which is traded on an established securities market. (8) Covered holder. The term covered holder has the meaning given the term in § 58.4501-4(f)(13)(ii)(C). (9) Covered non-stock instrument. The term covered non-stock instrument has the meaning given the term in § 58.4501-4(f)(13)(ii)(B). (10) De minimis exception. The term de minimis exception has the meaning given the term in § 58.4501-2(b)(2)(i). (11) Distributing corporation. The term distributing corporation has the meaning given the term in section 355(a)(1)(A). (12) E reorganization. The term E reorganization means a transaction that qualifies as a reorganization under section 368(a)(1)(E). (13) Economically similar transaction. The term economically similar transaction means a transaction described in § 58.4501-2(e)(4). (14) Employee. The term employee means an employee as defined in section 3401(c) of the Code and § 31.3401(c)-1 of this chapter, or a former employee, of a covered corporation or a specified affiliate of the covered corporation (as appropriate). (15) Employer-sponsored retirement plan —(i) In general. The term employer-sponsored retirement plan means a plan that includes a trust that is qualified under section 401(a) of the Code and maintained by a covered corporation or a specified affiliate of the covered corporation. (ii) ESOPs included. For the purposes of these regulations, the term employer-sponsored retirement plan includes an employee stock ownership plan defined in section 4975(e)(7) of the Code (ESOP) that is maintained by a covered corporation or a specified affiliate of the covered corporation. (16) Established securities market. The term established securities market has the meaning given the term in § 1.7704-1(b) of this chapter. (17) F reorganization. The term F reorganization means a transaction that qualifies as a reorganization under section 368(a)(1)(F). (18) Forfeiture. The term forfeiture means a surrender of stock to the issuing corporation for no consideration. (19) Gross repurchase amount. The term gross repurchase amount has the meaning given the term in § 58.4501-2(c)(1)(i). (20) Initiation date. The term initiation date means the date on which stock of a corporation begins to be traded on an established securities market. (21) IRS. The term IRS means the Internal Revenue Service. (22) Netting rule. The term netting rule has the meaning given the term in § 58.4501-4(a). (23) Non-RIC '40 Act fund. The term non-RIC '40 Act fund has the meaning given the term in § 58.4501-3(h). (24) Non-stock instrument. The term non-stock instrument has the meaning given the term in § 58.4501-4(f)(13)(ii)(A). (25) Recapitalizing corporation. The term recapitalizing corporation means the corporation recapitalizing its stock in an E reorganization. (26) REIT. The term REIT has the meaning given the term real estate investment trust in section 856(a) of the Code. (27) Reorganization exception. The term reorganization exception means the exception provided in § 58.4501-3(c). (28) Repurchase. The term repurchase has the meaning given the term in § 58.4501-2(e)(2). (29) RIC. The term RIC has the meaning given the term regulated investment company in section 851 of the Code. (30) SEC. The term SEC means the U.S. Securities and Exchange Commission. (31) Section 317(b) redemption. The term section 317(b) redemption means a redemption within the meaning of section 317(b) of the Code with regard to the stock of a covered corporation. (32) Specified affiliate. 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 interests of which is held, directly or indirectly, by the corporation. (33) Split-off. The term split-off means a distribution qualifying under section 355 (or so much of section 356 of the Code as relates to section 355) by a distributing corporation pursuant to which the shareholders of the distributing corporation exchange stock of the distributing corporation for stock of the controlled corporation and, if applicable, other property (including securities of the controlled corporation) or money. (34) Stock —(i) In general. Except as provided in paragraph (b)(34)(ii) or (iii) of this section, the term stock means any instrument issued by a corporation that is stock (including treasury 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. (ii) Additional tier 1 capital. The term stock does not include preferred stock that— (A) Qualifies as additional tier 1 capital (within the meaning of 12 CFR 3.20(c), 217.20(c), 217.608(a)(2), 324.20(c), or 628.20(c)); and (B) Does not qualify as common equity tier 1 capital (within the meaning of 12 CFR 3.20(b), 217.20(b), 217.608(a)(3), 324.20(b), or 628.20(b)). (iii) Section 1504(a)(4) stock. The term stock does not include preferred stock described in section 1504(a)(4) of the Code. (35) Stock repurchase excise tax. The term stock repurchase excise tax means the excise tax imposed by section 4501(a) on each covered corporation equal to the applicable percentage of the fair market value of any stock of the corporation that is repurchased by the corporation during the taxable year. (36) Stock repurchase excise tax base. The term stock repurchase excise tax base has the meaning given the term in § 58.4501-2(c)(1). (37) Stock repurchase excise tax regulations. The term stock repurchase excise tax regulations means— (i) Subparts A and B of this part; and (ii) Section 1.1275-6(f)(12)(iii) of this chapter (providing that the integration of a qualifying debt instrument with a hedge pursuant to § 1.1275-6 of this chapter is not taken into account in determining whether and when stock is repurchased or issued). (38) Taxable year. The term taxable year has the meaning given the term in section 7701(a)(23) of the Code. (39) Treasury stock. The term treasury stock means treasury stock within the meaning of section 317(b). (c) No application for any purposes of chapter 1 of the Code. The rules of this part have no application for purposes of chapter 1 of the Code. (d) Status as a domestic or foreign corporation. If a corporation is, or is treated as, a domestic corporation for purposes of the Code or for purposes that include chapter 37 of the Code, then the corporation is a domestic corporation for purposes of the stock repurchase excise tax regulations. A corporation that is not a domestic corporation for purposes of the stock repurchase excise tax regulations is a foreign corporation for such purposes. (e) F reorganizations. For purposes of the stock repurchase excise tax regulations, the transferor corporation and the resulting corporation (each as defined in § 1.368-2(m)(1) of this chapter) in an F reorganization are treated as the same corporation.