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Treasury and the IRS released two important pieces of guidance immediately before the Fourth of July holiday regarding the stock buyback excise tax and digital assets.

The IRS released procedural final regulations (TD 10002) on how covered corporations must report and pay the stock repurchase excise tax, which imposes a 1% surcharge on certain corporate stock buybacks occurring after 31 December 2022. The final regulations adopt the proposed regulations, released in April 2024, with some modifications and apply to stock repurchase excise tax returns required to be filed after 28 June 2024 (the date the final regulations were filed in the Federal Register). For a tax year ending after 31 December 2022, and on or before 28 June 2024, Form 7208 must be filed by the due date of the Form 720 for the first full calendar quarter after 28 June 2024, the effective date of the final regulations. Accordingly, the first Form 7208 is due, via attachment to Form 720, by 31 October 2024, for all tax years ending after 31 December 2022 and on or before 28 June 2024.

Under the final regulations, any covered corporation that makes a repurchase or is treated as making a repurchase would have to file the return and keep records of the repurchases, exceptions or adjustments, even if they qualify for an exception to the tax. The records would be available to the IRS for inspection, for purposes of determining whether the covered corporation is liable for the tax. The final regulations exempt real estate investment trusts (REITs) and regulated investment companies (RICs) from the filing requirements, but still subject them to the recordkeeping requirements. A Tax Alert provides details.

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The IRS also released final digital asset broker reporting regulations and transitional relief for certain brokers. First, final regulations (TD 10000) were issued that require custodial brokers to report sales and exchanges of digital assets beginning in calendar year 2025. Further, cost-basis reporting will be required by certain brokers, for transactions occurring on or after 1 January 2026.

In addition to the broker reporting rules, the final regulations provide rules for calculating basis, gain and loss from digital asset transactions and an optional, aggregate reporting method for certain sales of stablecoins and non-fungible tokens over a de minimis threshold. Importantly, the guidance requires reporting by digital asset brokers providing custodial services and delays the extension of the definition of broker to noncustodial persons that provide facilitative services.

The IRS and Treasury also issued three pieces of additional digital guidance.

Notice 2024-56 provides transition relief from reporting penalties and backup withholding for brokers who are not able to timely and accurately file information returns and furnish payee statements during calendar year 2025 if the broker makes a good faith effort to comply.

Notice 2024-57 identifies six types of digital asset transactions — including staking and digital asset lending — that will not be subject to information reporting until Treasury and the IRS issue further guidance. The IRS cautions that the deferred reporting should not be regarded as a conclusion that such transactions do or do not constitute sales or are otherwise subject to or exempt from tax.

Revenue Procedure 2024-28 creates a safe harbor under IRC Section 1012(c)(1) for allocating the unused basis of digital assets held within each wallet or account of a taxpayer as of 1 January 2025.

A Tax Alert on the digital guidance is pending.

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In a closely watched development, the Canadian government on 3 July posted an Order in Council on the government's website fixing the day Canada's Digital Services Tax Act (DSTA) comes into force as 28 June 2024. The DSTA implements a domestic digital services tax (DST) on certain revenue earned by large businesses from certain digital services that engage Canadian users; it is considered an interim measure until an acceptable OECD/G20 BEPS 2.0 Pillar One multilateral approach can be implemented. A Global Tax Alert provides details.

House Ways & Means Committee Chairman Jason Smith (R-MO) and Trade Subcommittee Chairman Adrian Smith (R-NE), in an 11 July letter signed by every Republican on the Committee, called on United States Trade Representative Katherine Tai to utilize authorities under Section 301 of the Trade Act to send a strong response to Canada's decision to impose a DST on US businesses "given the threat the DST poses to American workers and businesses."

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The OECD this week released for public comment a BEPS 2.0 Draft User Guide for the GloBE Information Return XML Schema. It is designed to facilitate domestic Global Anti-Base Erosion (GloBE) information return (GIR) filings "and to be the technical format for exchanging GIR information between tax administrations." The GloBE Model Rules require an annual GIR filing that provides information on tax calculations made by a multinational entity group. Comments are due by 19 August.