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SPACs Push to Close Up Shop Early as New US Tax Targets Share Buybacks

  • Biden tax plan may push added fees on SPAC investors, sponsors
  • Industry looking to IRS for potential relief for failed deals

SPAC sponsors, already grappling with Wall Street’s lost appetite for their deals, are beginning to shut down operations early to avoid potential hits from a new US tax that targets share buybacks.

The bulk of the $165 billion held by special-purpose acquisition companies could face a 1% excise tax if they return cash to investors after the start of the new year, making them collateral damage of the new provision included in President Joe Biden’s Inflation Reduction Act. Already, two SPACs have specified that they want to return the cash they raised to investors before year-end to avoid getting dinged, and that number is likely to grow.