The Form 7208 is used to figure out the excise tax on repurchases of corporate stock. The Inflation Reduction Act of 2022 established a stock repurchase excise tax under section 4501 amounting to 1% of the fair market value (FMV) of stock repurchased during the tax year by certain publicly traded corporations or specified affiliates, effective for repurchases occurring after 2022.
The amount of excise tax is calculated on the total value of the repurchased stock and is intended to apply to “covered corporations” as defined under the IRS guidelines.
Under the IRS regulation in Section 4501, covered corporations are required to file this excise tax for any stock repurchases made during the tax year. If the corporation repurchases its stock after December 31 2022, then it must report and pay this excise tax.
A covered corporation whose stock is repurchased or acquired during the tax year by such corporation or a specified affiliate.
An applicable specified affiliate of an applicable foreign corporation whose stock is acquired or treated as acquired tax during the year of such applicable foreign corporation.
An expatriated entity with respect to a covered surrogate foreign corporation whose stock is repurchased or acquired during the tax year of such expatriated entity by such covered surrogate foreign corporation or a specified affiliate of such covered surrogate foreign corporation.
The filing deadline for Form 7208 depends on the corporation’s tax year. According to final IRS regulations:
For taxable years ending after Dec 31, 2022, and on or before June 28, 2024, the due date is October 31, 2024.
For taxable years ending after June 28, 2024, the excise tax return must be filed using Form 7208 along with Form 720. The due date is the same as the filing deadline for Form 720 for the first full calendar quarter following the end of the corporation’s tax year.
For example: A corporation with the calendar year ending on Dec 31 2023, must file a single form 720 along with Form 7208 for the 2023 tax year. The due date is Oct 31, 2024.
A corporation with a June 30 year end, needs to file a Form 720 and Form 7208 for the tax year ending June 30, 2023, and a separate Form 720 and Form 7208 for the tax year ending June 30, 2024.
Period Covered - Enter the tax year for which you are filing the Form 7208.
Name and EIN - Your name and EIN need to be entered.
Total Stock Repurchases - This is the Part I of the Form 7208. All the information required to compute the total FMV of stock repurchased in your tax year need to be filled in this section.
Exceptions - This is the Part II of Form 7208. Here, detailed information on the proposed application of exceptions needs to be filled.
Contributions to employer-sponsored retirement plans - This Part III of Form 7208, where you enter the details regarding proposed treatment of stock contributed to an employer-sponsored retirement plan.
Stock issued or provided - This is Part IV of the Form 7208 that lists proposed circumstances in which an issuance of stock is disregarded. Information pertaining to stock issued or provided to employees as part of their benefits or compensation is mentioned in this section.
Tax and payments - This is Part V of Form 7208 that calculates the excise tax based on the information provided in the above sections.
Read our Form 7208 filing guide to complete your filing in a few minutes.
Conclusion
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