On December 6, 2022, MFA submitted recommendations to the Department of the Treasury (Treasury) and the Internal Revenue Service (IRS) about items to be included in the 2022-2023 Priority Guidance Plan.
The letter urges issuing guidance under Section 4501,2 clarifying that the excise tax on the repurchase of corporate stock (Excise Tax) does not apply to any redemption of stock over the course of the life of a special purpose acquisition company (SPAC), including in connection with de-SPAC transactions and SPAC liquidations. The letter notes that excluding such transactions from the Excise Tax on the basis of any of the rationales described above, including, among others, that:
- Congress did not contemplate that the Excise Tax would apply to transactions that neither resemble nor reach the intended result of traditional share repurchase programs initiated by public company management;
- Redemptions of SPAC shares take place under the terms of the very instruments under which cash came into the company in the first place and are economically distinct from buybacks that a public company itself initiates; or
- De-SPAC transactions and SPAC liquidations do not affect target businesses’ ability to pay wages or make other business investments and do not raise concerns about price manipulation or tax avoidance.