26 U.S.C. § 4501 — Repurchase of corporate stock

**(a) General rule** There is hereby imposed on each covered corporation a tax equal to 1 percent of the fair market value of any stock of the corporation which is repurchased by such corporation during the taxable year. **(b) Covered corporation** For purposes of this section, 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)). **(c) Repurchase** For purposes of this section— (1) **In general** — The term “repurchase” means— (A) a redemption within the meaning of section 317(b) with regard to the stock of a covered corporation, and (B) any transaction determined by the Secretary to be economically similar to a transaction described in subparagraph (A). (2) **Treatment of purchases by specified affiliates** (A) *In general* — The acquisition of stock of a covered corporation by a specified affiliate of such covered corporation, from a person who is not the covered corporation or a specified affiliate of such covered corporation, shall be treated as a repurchase of the stock of the covered corporation by such covered corporation. (B) *Specified affiliate* — For purposes of this section, the term “specified affiliate” means, with respect 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. (3) **Adjustment** — The amount taken into account under subsection (a) with respect to any stock repurchased by a covered corporation shall be 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 such covered corporation or employees of a specified affiliate of such covered corporation during the taxable year, whether or not such stock is issued or provided in response to the exercise of an option to purchase such stock. **(d) Special rules for acquisition of stock of certain foreign corporations** (1) **In general** — In the case of an acquisition of stock of an applicable foreign corporation by a specified affiliate of such corporation (other than a foreign corporation or a foreign partnership (unless such partnership has a domestic entity as a direct or indirect partner)) from a person who is not the applicable foreign corporation or a specified affiliate of such applicable foreign corporation, for purposes of this section— (A) such specified affiliate shall be treated as a covered corporation with respect to such acquisition, (B) such acquisition shall be treated as a repurchase of stock of a covered corporation by such covered corporation, and (C) the adjustment under subsection (c)(3) shall be determined only with respect to stock issued or provided by such specified affiliate to employees of the specified affiliate. (2) **Surrogate foreign corporations** — In the case of a repurchase of stock of a covered surrogate foreign corporation by such covered surrogate foreign corporation, or an acquisition of stock of a covered surrogate foreign corporation by a specified affiliate of such corporation, for purposes of this section— (A) the expatriated entity with respect to such covered surrogate foreign corporation shall be treated as a covered corporation with respect to such repurchase or acquisition, (B) such repurchase or acquisition shall be treated as a repurchase of stock of a covered corporation by such covered corporation, and (C) the adjustment under subsection (c)(3) shall be determined only with respect to stock issued or provided by such expatriated entity to employees of the expatriated entity. (3) **Definitions** — For purposes of this subsection— (A) *Applicable foreign corporation* — The term “applicable foreign corporation” means any foreign corporation the stock of which is traded on an established securities market (within the meaning of section 7704(b)(1)). (B) *Covered surrogate foreign corporation* — The term “covered surrogate foreign corporation” means any surrogate foreign corporation (as determined under section 7874(a)(2)(B) by substituting “September 20, 2021” for “March 4, 2003” each place it appears) the stock of which is traded on an established securities market (within the meaning of section 7704(b)(1)), but only with respect to taxable years which include any portion of the applicable period with respect to such corporation under section 7874(d)(1). (C) *Expatriated entity* — The term “expatriated entity” has the meaning given such term by section 7874(a)(2)(A). **(e) Exceptions** Subsection (a) shall not apply— (1) to the extent that the repurchase is part of a reorganization (within the meaning of section 368(a)) and no gain or loss is recognized on such repurchase by the shareholder under chapter 1 by reason of such reorganization, (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, or similar plan, (3) in any case in which the total value of the stock repurchased during the taxable year does not exceed $1,000,000, (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, (5) to repurchases by a regulated investment company (as defined in section 851) or a real estate investment trust, or (6) to the extent that the repurchase is treated as a dividend for purposes of this title. **(f) Regulations and guidance** The Secretary shall prescribe such regulations and other guidance as are necessary or appropriate to carry out, and to prevent the avoidance of, the purposes of this section, including regulations and other guidance— (1) to prevent the abuse of the exceptions provided by subsection (e), (2) to address special classes of stock and preferred stock, and (3) for the application of the rules under subsection (d).