---
kind: "section"
citation: "26 U.S.C. § 4501"
title: "26"
title_heading: "Internal Revenue Code"
number: "4501"
heading: "Repurchase of corporate stock"
release: "119-102"
url: "https://uscodex.org/usc/26/4501"
units:
  - "Subtitle D — Miscellaneous Excise Taxes"
  - "Chapter 37 — Repurchase of Corporate Stock"
---

# §4501. Repurchase of corporate stock

- (a) **General rule—** There is hereby imposed on each [covered corporation](#b) a tax equal to 1 percent of the fair market value of any [stock](/usc/26/7701.md?p=a-7) of the [corporation](/usc/26/7701.md?p=a-3) which is repurchased by such [corporation](/usc/26/7701.md?p=a-3) during the [taxable year](/usc/26/7701.md?p=a-23).
- (b) **Covered corporation—** For purposes of this section, the term “covered corporation” means any [domestic](/usc/26/7701.md?p=a-4) [corporation](/usc/26/7701.md?p=a-3) the [stock](/usc/26/7701.md?p=a-7) of which is traded on an established securities market (within the meaning of [section 7704(b)(1)](/usc/26/7704.md?p=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)](/usc/26/317.md?p=b) with regard to the [stock](/usc/26/7701.md?p=a-7) of a [covered corporation](#b), and
    - (B) any transaction determined by the [Secretary](/usc/26/7701.md?p=a-11-B) to be economically similar to a transaction described in [subparagraph (A)](#c-1-A).
  - (2) **Treatment of purchases by specified affiliates—**
    - (A) **In general—** The acquisition of [stock](/usc/26/7701.md?p=a-7) of a [covered corporation](#b) by a [specified affiliate](#c-2-B) of such [covered corporation](#b), from a [person](/usc/26/7701.md?p=a-1) who is not the [covered corporation](#b) or a [specified affiliate](#c-2-B) of such [covered corporation](#b), shall be treated as a [repurchase](#c-1) of the [stock](/usc/26/7701.md?p=a-7) of the [covered corporation](#b) by such [covered corporation](#b).
    - (B) **Specified affiliate—** For purposes of this section, the term “specified affiliate” means, with respect to any [corporation](/usc/26/7701.md?p=a-3)—
      - (i) any [corporation](/usc/26/7701.md?p=a-3) more than 50 percent of the [stock](/usc/26/7701.md?p=a-7) of which is owned (by vote or by value), directly or indirectly, by such [corporation](/usc/26/7701.md?p=a-3), and
      - (ii) any [partnership](/usc/26/7701.md?p=a-2) more than 50 percent of the capital interests or profits interests of which is held, directly or indirectly, by such [corporation](/usc/26/7701.md?p=a-3).
  - (3) **Adjustment—** The amount taken into account under [subsection (a)](#a) with respect to any [stock](/usc/26/7701.md?p=a-7) repurchased by a [covered corporation](#b) shall be reduced by the fair market value of any [stock](/usc/26/7701.md?p=a-7) issued by the [covered corporation](#b) during the [taxable year](/usc/26/7701.md?p=a-23), [including](/usc/26/7701.md?p=c) the fair market value of any [stock](/usc/26/7701.md?p=a-7) issued or provided to [employees](/usc/26/101.md?p=i-3) of such [covered corporation](#b) or [employees](/usc/26/101.md?p=i-3) of a [specified affiliate](#c-2-B) of such [covered corporation](#b) during the [taxable year](/usc/26/7701.md?p=a-23), whether or not such [stock](/usc/26/7701.md?p=a-7) is issued or provided in response to the exercise of an option to purchase such [stock](/usc/26/7701.md?p=a-7).
- (d) **Special rules for acquisition of stock of certain foreign corporations—**
  - (1) **In general—** In the case of an acquisition of [stock](/usc/26/7701.md?p=a-7) of an [applicable foreign corporation](#d-3-A) by a [specified affiliate](#c-2-B) of such [corporation](/usc/26/7701.md?p=a-3) (other than a [foreign](/usc/26/7701.md?p=a-5) [corporation](/usc/26/7701.md?p=a-3) or a [foreign](/usc/26/7701.md?p=a-5) [partnership](/usc/26/7701.md?p=a-2) (unless such [partnership](/usc/26/7701.md?p=a-2) has a [domestic](/usc/26/7701.md?p=a-4) entity as a direct or indirect [partner](/usc/26/7701.md?p=a-2))) from a [person](/usc/26/7701.md?p=a-1) who is not the [applicable foreign corporation](#d-3-A) or a [specified affiliate](#c-2-B) of such [applicable foreign corporation](#d-3-A), for purposes of this section—
    - (A) such [specified affiliate](#c-2-B) shall be treated as a [covered corporation](#b) with respect to such acquisition,
    - (B) such acquisition shall be treated as a [repurchase](#c-1) of [stock](/usc/26/7701.md?p=a-7) of a [covered corporation](#b) by such [covered corporation](#b), and
    - (C) the adjustment under [subsection (c)(3)](#c-3) shall be determined only with respect to [stock](/usc/26/7701.md?p=a-7) issued or provided by such [specified affiliate](#c-2-B) to [employees](/usc/26/101.md?p=i-3) of the [specified affiliate](#c-2-B).
  - (2) **Surrogate foreign corporations—** In the case of a [repurchase](#c-1) of [stock](/usc/26/7701.md?p=a-7) of a [covered surrogate foreign corporation](#d-3-B) by such [covered surrogate foreign corporation](#d-3-B), or an acquisition of [stock](/usc/26/7701.md?p=a-7) of a [covered surrogate foreign corporation](#d-3-B) by a [specified affiliate](#c-2-B) of such [corporation](/usc/26/7701.md?p=a-3), for purposes of this section—
    - (A) the [expatriated entity](#d-3-C) with respect to such [covered surrogate foreign corporation](#d-3-B) shall be treated as a [covered corporation](#b) with respect to such [repurchase](#c-1) or acquisition,
    - (B) such [repurchase](#c-1) or acquisition shall be treated as a [repurchase](#c-1) of [stock](/usc/26/7701.md?p=a-7) of a [covered corporation](#b) by such [covered corporation](#b), and
    - (C) the adjustment under [subsection (c)(3)](#c-3) shall be determined only with respect to [stock](/usc/26/7701.md?p=a-7) issued or provided by such [expatriated entity](#d-3-C) to [employees](/usc/26/101.md?p=i-3) of the [expatriated entity](#d-3-C).
  - (3) **Definitions—** For purposes of this subsection—
    - (A) **Applicable foreign corporation—** The term “applicable foreign corporation” means any [foreign](/usc/26/7701.md?p=a-5) [corporation](/usc/26/7701.md?p=a-3) the [stock](/usc/26/7701.md?p=a-7) of which is traded on an established securities market (within the meaning of [section 7704(b)(1)](/usc/26/7704.md?p=b-1)).
    - (B) **Covered surrogate foreign corporation—** The term “covered surrogate foreign corporation” means any surrogate [foreign](/usc/26/7701.md?p=a-5) [corporation](/usc/26/7701.md?p=a-3) (as determined under [section 7874(a)(2)(B)](/usc/26/7874.md?p=a-2-B) by substituting “September 20, 2021” for “March 4, 2003” each place it appears) the [stock](/usc/26/7701.md?p=a-7) of which is traded on an established securities market (within the meaning of [section 7704(b)(1)](/usc/26/7704.md?p=b-1)), but only with respect to [taxable years](/usc/26/7701.md?p=a-23) which include any portion of the applicable period with respect to such [corporation](/usc/26/7701.md?p=a-3) under [section 7874(d)(1)](/usc/26/7874.md?p=d-1).
    - (C) **Expatriated entity—** The term “expatriated entity” has the meaning given such term by [section 7874(a)(2)(A)](/usc/26/7874.md?p=a-2-A).
- (e) **Exceptions—** [Subsection (a)](#a) shall not apply—
  - (1) to the extent that the [repurchase](#c-1) is part of a reorganization (within the meaning of [section 368(a)](/usc/26/368.md?p=a)) and no gain or loss is recognized on such [repurchase](#c-1) by the [shareholder](/usc/26/7701.md?p=a-8) under [chapter 1](/usc/26/chstA-ch1.md) by reason of such reorganization,
  - (2) in any case in which the [stock](/usc/26/7701.md?p=a-7) repurchased is, or an amount of [stock](/usc/26/7701.md?p=a-7) equal to the value of the [stock](/usc/26/7701.md?p=a-7) repurchased is, contributed to an employer-sponsored retirement plan, [employee](/usc/26/101.md?p=i-3) [stock](/usc/26/7701.md?p=a-7) ownership plan, or similar plan,
  - (3) in any case in which the total value of the [stock](/usc/26/7701.md?p=a-7) repurchased during the [taxable year](/usc/26/7701.md?p=a-23) does not exceed $1,000,000,
  - (4) under regulations prescribed by the [Secretary](/usc/26/7701.md?p=a-11-B), in cases in which the [repurchase](#c-1) is by a dealer in securities in the ordinary course of business,
  - (5) to [repurchases](#c-1) by a regulated investment company (as defined in [section 851](/usc/26/851.md)) or a [real estate investment trust](/usc/26/856.md?p=a), or
  - (6) to the extent that the [repurchase](#c-1) is treated as a dividend for purposes of this title.
- (f) **Regulations and guidance—** The [Secretary](/usc/26/7701.md?p=a-11-B) 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](/usc/26/7701.md?p=c) regulations and other guidance—
  - (1) to prevent the abuse of the exceptions provided by [subsection (e)](#e),
  - (2) to address special classes of [stock](/usc/26/7701.md?p=a-7) and preferred [stock](/usc/26/7701.md?p=a-7), and
  - (3) for the application of the rules under [subsection (d)](#d).

## Source credit

(Added Pub. L. 117–169, title I, § 10201(a), Aug. 16, 2022, 136 Stat. 1829.)

## Notes

### Editorial Notes

### Prior Provisions

Prior sections 4501 to 4503 were repealed by Pub. L. 101–508, title XI, § 11801(a)(48), Nov. 5, 1990, 104 Stat. 1388–522. For provisions that nothing in repeal by Pub. L. 101–508 be construed to affect treatment of certain transactions occurring, property acquired, or items of income, loss, deduction, or credit taken into account prior to Nov. 5, 1990, for purposes of determining liability for tax for periods ending after Nov. 5, 1990, see section 11821(b) of Pub. L. 101–508, set out as a note under section 45K of this title.

Section 4501, acts Aug. 16, 1954, ch. 736, 68A Stat. 533; May 29, 1956, ch. 342, § 19, 70 Stat. 221; Sept. 2, 1958, Pub. L. 85–859, title I, § 162(b), 72 Stat. 1306; July 6, 1960, Pub. L. 86–592, § 2, 74 Stat. 330; Mar. 31, 1961, Pub. L. 87–15, § 2(a), 75 Stat. 40; May 24, 1962, Pub. L. 87–456, title III, § 302(a), (b), 76 Stat. 77; July 13, 1962, Pub. L. 87–535, § 18(a), 76 Stat. 166; Nov. 8, 1965, Pub. L. 89–331, § 13, 79 Stat. 1280; Oct. 14, 1971, Pub. L. 92–138, § 18(b), 85 Stat. 390, related to imposition of tax upon sugar manufactured in United States.

Section 4502, acts Aug. 16, 1954, ch. 736, 68A Stat. 534; May 29, 1956, ch. 342, § 20, 70 Stat. 221; June 25, 1959, Pub. L. 86–70, § 22(c), 73 Stat. 146; July 12, 1960, Pub. L. 86–624, § 18(f), 74 Stat. 416, provided for applicable definitions.

Section 4503, act Aug. 16, 1954, ch. 736, 68A Stat. 534, related to exemption for sugar manufactured for home consumption.

Prior sections 4504 and 4511 to 4514 were repealed by Pub. L. 87–456, title III, § 302(d), May 24, 1962, 76 Stat. 77, effective with respect to articles entered or withdrawn from warehouse, for consumption on or after Aug. 31, 1963, as provided by section 501(a) of Pub. L. 87–456.

Section 4504, acts Aug. 16, 1954, ch. 736, 68A Stat. 535; May 29, 1956, ch. 342, § 21(a), 70 Stat. 221, required the tax imposed by section 4501(b) to be levied, assessed, collected and paid in the same manner as a duty imposed by the Tariff Act of 1930.

Section 4511, act Aug. 16, 1954, ch. 736, 68A Stat. 536, imposed a tax upon the processing of coconut oil, etc.

Section 4512, act Aug. 16, 1954, ch. 736, 68A Stat. 536, defined “first domestic processing”.

Section 4513, act Aug. 16, 1954, ch. 736, 68A Stat. 536, related to exemptions from the tax imposed.

Section 4514, act Aug. 16, 1954, ch. 736, 68A Stat. 536, set forth a cross-reference to subtitle F for administrative provisions.

### Statutory Notes and Related Subsidiaries

### Effective Date

Pub. L. 117–169, title I, § 10201(d), Aug. 16, 2022, 136 Stat. 1831, provided that: “The amendments made by this section [enacting this chapter and amending section 275 of this title] shall apply to repurchases (within the meaning of section 4501(c) of the Internal Revenue Code of 1986, as added by this section) of stock after December 31, 2022.”