Analysis: Corporations Poised to Dodge $15M in New Stock Buyback Taxes Through ASR Loophole

WASHINGTON D.C. — A new analysis from watchdog Accountable.US found that five publicly-traded companies have already announced nearly $1.5 billion in accelerated share repurchase (ASR) programs —potentially avoiding the roughly $15 million they would owe under the Inflation Reduction Act’s new 1% stock buyback tax—after spending $2.5 billion on buybacks in their most recent fiscal years.  As the law’s new 1% tax on the transactions becomes effective after December 31st, Accountable.US’ analysis points to a growing trend of companies trying to avoid paying their fair share in taxes via ASRs, which undercut the Inflation Reduction Act’s efforts to bring down costs for average families by reducing the deficit. 

Major corporations have largely preferred buybacks since the passage of the 2017 Trump tax cuts, with corporations spending $1 trillion on buybacks in the first year after its signing. In 2021, companies within the S&P 500 increased buybacks by nearly 70% year-over-year while prioritizing buybacks over capital expenditures in the first half of the year. Most recently, companies within the S&P 500 have spent a record $281 billion on stock buybacks in the first quarter of 2022 alone and the top 100 U.S. companies have spent $816 billion on buybacks in the past year alone. As Accountable.US has documented extensively for months, some companies rewarding investors with generous handouts include many who have suggested they had no choice but to inflate prices on consumers to unreasonable degrees.

KEY FINDINGS:

• August 18, 2022: Kohl’s Corporation—with over 1,100 stores in 49 states—entered an ASR as part of its $500 million stock buyback program after spending $1.4 billion on stock buybacks in its FY 2021 compared to just $8 million in FY 2020 after the suspension of its buyback program in Q1 2020.
  
• August 23, 2022: American Vanguard Corporation—an agricultural and specialty products company—announced a $20 million ASR after spending over $4.5 million on stock buybacks in its FY 2021.
  
• August 24, 2022: Popular, Inc.—Puerto Rico’s “leading financial institution” and a top 50 U.S. bank by asset size—announced a $231 million ASR after spending over $350.5 million on stock buybacks in its FY 2021. Popular expected to receive 2,339,241 shares of company stock just two days after the agreement.
  
• August 25, 2022: Synopsys, Inc.—an S&P 500 electronics company—announced a $240 million ASR set to be completed in November 2022 after spending $753 million on stock buybacks in its FY 2021 and enjoying a 6.1% effective tax rate that same year. 
• August 31, 2022: Dover Corporation—a “global manufacturer and solutions provider” with about $8 billion in revenue—established a $500 million ASR, with a “substantial majority” of shares expected to be received the next day, after spending $21.6 million on stock buybacks in its FY 2021. 

In addition to these ASRs, three major corporations have recently announced increased future buybacks, including $19 billion in new buyback authorizations: 

• September 14, 2022: Johnson & Johnson announced a new $5 billion stock buyback program in order to help “‘deliver shareholder returns and drive long-term growth.’”
  
• September 8, 2022: T-Mobile announced a new $14 billion stock buyback program set to expire at the end of September 2023.
  
• September 14, 2022: Comcast announced it would be doubling its current stock buyback authorization to a record $20 billion even after increasing it to $10 billion in January 2022.