Companies would pay a 4% tax on buybacks under Senate plan

Public companies could face a much steeper federal tax bill when they choose to buy back their own shares. In Washington, the Senate proposal would raise the excise tax on corporate stock repurchases from 1% to 4%, turning a narrow levy into a stronger penalty on buybacks as a way to return cash to shareholders.

The measure is S. 4796, the Stock Buyback Accountability Act of 2026. It targets repurchases of corporate stock, not a broad corporate tax overhaul, and it would also revise the adjustment language in section 4501(c)(3) of the Internal Revenue Code of 1986.

A more expensive way to return cash

Stock buybacks are one of the main ways companies return money to shareholders. When the tax on those repurchases goes up, the decision to use cash for buybacks becomes more expensive relative to other options, such as reinvesting in the business or holding more cash.

That is the practical point of the change. It is aimed at corporate behavior, not just revenue collection, and it would push boards to weigh repurchases against other uses of cash every time they decide what to do with excess money.

What changes in the tax code

The bill would do more than swap one number for another. It would amend section 4501(a) of the tax code by striking "1 percent" and inserting "4 percent," then adjust the language that determines how the tax is calculated in section 4501(c)(3).

The proposal was entered by Senator Chuck Schumer with a group of co-sponsors, but the reader-facing change is straightforward: if a company chooses to repurchase stock, the federal tax on that decision would be higher. For boards, that means one more reason to compare buybacks with dividends, investment and cash on hand.