Wills, Trusts & Estates Prof Blog

Editor: Gerry W. Beyer
Texas Tech Univ. School of Law

Sunday, August 21, 2022

The New Stock Buyback Tax: What It Means For Apple, S&P 500

CongressThe Inflation Reduction Act that was signed into law this week includes a 1% excise tax on corporate share buybacks that will go into effect in 2023.

A share buyback is when a public company uses excess cash to purchase shares of its own stock or make an offer to shareholders. Share buybacks reached a record high in 2021 and have already surpassed $500 billion paid out in 2022 so far. A significant percentage comes from five companies in particular: Apple, Alphabet, Meta, Microsoft, and Bank of America.

Proponents of the bill say that it is expected to raise about $74 billion over the next decade, which will be used to fund initiatives like credits to built electric cars. Experts say that the tax is not significant and likely won’t deter companies from repurchasing shares or push them towards dividends.

Since buybacks will remain tax-free through the end of 2022, some experts are preparing for a buyback frenzy, which could supports the S&P 500 at a volatile time.

For more information:

See Jed Graham “The New Stock Buyback Tax: What It Means For Apple, S&P 500” Investor’s Business Daily, August 9, 2022.

Special thanks to David S. Luber (Florida Probate Attorney) for bringing this article to my attention.

https://lawprofessors.typepad.com/trusts_estates_prof/2022/08/the-new-stock-buyback-tax-what-it-means-for-apple-sp-500.html

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