Final Regulations Under Section 4501 – Changes of Potential Interest to Cooperatives

Congress added Section 4501 to the Code as part of the Inflation Reduction Act of 2022, P.L. 117-58 (August 16, 2022).  This section imposes a 1% excise tax on certain repurchases of corporate stock.

Section 4501(b) limits applicability to corporations which are “covered corporations,” defined as “any domestic corporation the stock of which is traded on an established securities market (within the meaning of section 7704(b)(1).”  Most Subchapter T cooperatives do not have stock that is traded.  As a result, this tax should not apply to most Subchapter T cooperatives. 

However, a few Subchapter T cooperatives have preferred stock that clearly is publicly traded.  A few others have interests that are traded in a manner that might be considered as “traded on an established securities market (within the meaning of section 7704(b)(1).”                 

The Treasury/IRS recently released final regulations for this new tax.

To read the rest of this article in The Cooperative Account, Spring 2026, please log into Connect