What This Bill Does
This bill increases a special tax on companies when they buy back their own stock. A stock buyback happens when a company repurchases shares of its own stock from shareholders. The bill also creates an exception for stock given to certain employees.
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Who It Affects
Corporations that repurchase their own stock and employees who receive stock from their employers.
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Key Provisions
• Companies must pay a 4 percent tax when they buy back their own stock, instead of the current 1 percent rate (Sec. 2(a))
• The tax does not apply to stock that a company issues or gives to an employee classified as a "covered employee" (Sec. 2(b))
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What Changes
The excise tax rate on stock repurchases increases from 1 percent to 4 percent for all buybacks that happen after this law passes. Companies no longer have to count stock given to covered employees when calculating the tax on their repurchases.
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Important Definitions
• Covered employee: An employee as defined in a section of the tax code dealing with executive compensation (Sec. 2(b))
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Effective Date
The tax rate increase applies to stock repurchases after the date this act becomes law. The employee stock exception applies to stock issued or provided after the date this act becomes law, in tax years ending after that date (Sec. 2(c))
II
118TH CONGRESS
1ST SESSION
S. 413
To amend the Internal Revenue Code of 1986 to increase the rate of the
excise tax on the repurchase of corporate stock, and for other purposes.
IN THE SENATE OF THE UNITED STATES
FEBRUARY 14, 2023
Mr. BROWN (for himself, Mr. WYDEN, Mr. SCHATZ, Mr. VAN HOLLEN, Mr.
REED, Mr. LUJA´N, and Ms. BALDWIN) introduced the following bill;
which was read twice and referred to the Committee on Finance
A BILL
To amend the Internal Revenue Code of 1986 to increase
the rate of the excise tax on the repurchase of corporate
stock, and for other purposes.
Be it enacted by the Senate and House of Representa-
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tives of the United States of America in Congress assembled,
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SECTION 1. SHORT TITLE.
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This Act may be cited as the ‘‘Stock Buyback Ac-
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countability Act of 2023’’.
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•S 413 IS
SEC. 2. MODIFICATIONS TO TAX ON REPURCHASE OF COR-
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PORATE STOCK.
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(a) INCREASE IN RATE OF TAX.—Section 4501(a) of
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the Internal Revenue Code of 1986 is amended by striking
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‘‘1 percent’’ and inserting ‘‘4 percent’’.
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(b) MODIFICATION
OF
ADJUSTMENTS.—Section
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4501(c)(3) of the Internal Revenue Code of 1986 is
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amended—
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(1) by striking ‘‘The amount’’ and inserting the
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following:
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‘‘(A) IN GENERAL.—The amount’’, and
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(2) by adding at the end the following new sub-
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paragraph:
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‘‘(B) EXCEPTION FOR STOCK ISSUED TO
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COVERED
EMPLOYEES.—Subparagraph
(A)
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shall not apply to so much of the fair market
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value of any stock issued or provided to an em-
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ployee who is a covered employee (within the
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meaning of section 162(m)(3)).’’.
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(c) EFFECTIVE DATE.—
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(1) RATE.—The amendment made by sub-
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section (a) section shall apply to repurchases (within
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the meaning of section 4501(c) of the Internal Rev-
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enue Code of 1986) of stock after the date of the
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enactment of this Act.
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•S 413 IS
(2) ADJUSTMENTS.—The amendments made by
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subsection (b) shall apply to stock issued or provided
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after the date of the enactment of this Act, in tax-
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able years ending after such date.
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