No Relief for SPACs Under Buyback Tax Proposal

spac

Special-purpose acquisition companies won’t get sought-after relief from a new 1% tax on stock buybacks under a recent Treasury Department proposal that otherwise provides helpful clarity on the tax’s implications for the subdued SPAC market, Law360 reports.

The Treasury Department and IRS decided it was neither necessary nor appropriate to adopt special rules for SPACs in the proposed regulations. As a result, SPACs are generally subject to the rules in the same manner as other taxpayers.

The regulations do not provide transition relief from the stock repurchase excise tax for payments in connection with merger and acquisition transactions pursuant to a binding commitment entered into prior to the enactment date of the tax. Similarly, no transition relief is provided for redemptions by SPACs formed prior to the enactment date.

The regulations also do not provide an exception for stock redemptions subject to a mandatory redemption provision or unilateral put option, which is a type of stock commonly issued by SPACs.

Additionally the regulations do not expand the netting rule to apply to de-SPAC transactions in which the SPAC is not the acquiring corporation, such as “double dummy” transactions. Read more.

Total
0
Shares
Related Posts
Alkuri Global Acquisition
Read More

Babylon Going Private via MindMaze Deal

Babylon, founded by its CEO Ali Parsa, was said last summer to be holding preliminary discussions with some investors about how to address a crumbling share price that’s wiped almost $4 billion off its value since its October 2021 listing in New York. Babylon at the time dismissed those claims as "market gossip."