The SEC is reopening the comment period because since the proposal was unveiled, Democrats in Congress passed the Inflation Reduction Act of 2022 and President Joe Biden signed it into law in August. The bill included a provision that imposed a 1% tax on stock buybacks.
The SEC's division of economic and risk analysis published a memorandum Wednesday detailing how the Inflation Reduction Act could impact the agency's proposal, including introducing several uncertainties. For instance, there are data limitations on estimating the number of companies that could be subject to both the stock buyback provision in the Inflation Reduction Act and the disclosure requirements in the proposal.
Also, there are limitations on predicting the magnitude of shifts in company behavior. "While it is likely that the new excise tax will cause some issuers to reduce the frequency and/or size of their repurchases or choose to declare a dividend instead, several limitations make it difficult to forecast how many filers that engaged in repurchases in the past will cease or reduce repurchases after the excise tax takes effect," the memorandum said.
The comment period will remain open for 30 days after publication in the Federal Register.
SEC Commissioner Mark T. Uyeda, a Republican who was not on the commission when the proposal was approved in a 3-2 vote last year, said in a statement that while he supports the addition of the staff's memorandum and the reopening of the comment period generally, the 30-day period is problematic because it's too short and overlaps with major holidays later this month.
"One might ask: What is the purpose of the comment period?" Mr. Uyeda said. "Is it merely an item to be checked off to satisfy the lowest acceptable standard of process required by the Administrative Procedures Act? Or is it a vital component of a discussion between an administrative agency and the public in order to better understand the effects of a proposed rule, especially under a changed factual scenario? I believe it is the latter."
Mr. Uyeda said a 45-day comment period would increase the likelihood that the commission receives more thoughtful responses.
This will be the second time the SEC has reopened the stock buyback proposal's comment period. In October, its comment period, along with 11 other proposals, were reopened for 30 days due to an earlier technological error that resulted in the SEC not receiving a number of filed comments.
