CRH

What are the tax implications for US shareholders and for the company?

Created August 08, 2025 at 08:22 AM

Overview of the transaction

- Who: CR plc (an Irish‑registered company listed in the United Kingdom)

- What: On 7 August 2025 the company repurchased a number of its ordinary shares that were held by U.S. investors. The shares were bought in the United States through BNP Paribas Securities Corp, were redeemed (i.e., cancelled) and therefore are not held in treasury.

- Why it matters for tax: A share‑repurchase (also called a “buy‑back”) can be taxed to the shareholder either as a return‑of‑capital (a reduction of the shareholder’s basis), a capital‑gain transaction, or, under certain circumstances, as a dividend. The company’s own tax position is also affected: the repurchase is not deductible for corporate income‑tax purposes, but it reduces the corporation’s equity and can affect the calculation of earnings per share and any foreign‑tax‑credit (FTC) considerations.

Below is a comprehensive, U.S.‑centric tax analysis for:

U.S. shareholders (individuals, trusts, and U.S. corporations).
CR plc itself (as a foreign corporation).

1. Tax Implications for U.S. Shareholders

1.1. How a U.S. tax authority treats a foreign‑company share repurchase

Situation	Tax classification under U.S. law	Resulting tax treatment for shareholder
Complete redemption that meets the “complete‑redemption” tests (Section 302(b)(3) and (b)(4) of the Internal Revenue Code – IRC)	Treated as a sale of the stock, not a dividend.	Capital gain or loss = (redemption price – adjusted basis). • Long‑term capital‑gain rates (0 % / 15 % / 20 % plus 3.8 % Net‑Investment‑Income Tax (NIIT) if held > 1 yr). • Short‑term capital‑gain rates (ordinary‑income rates, up to 37 % + NIIT) if held ≤ 1 yr.
Redemption does NOT meet the complete‑redemption tests (e.g., the shareholder retains a “substantial interest” or the redemption is part of a larger plan)	Treated as a dividend under Section 316 (or as a “deemed dividend” under Section 302(a)).	Dividend treatment: Qualified‑dividend (if the shareholder meets the qualified‑dividend holding‑period test) → taxed at qualified‑dividend rates (0 % / 15 % / 20 % + NIIT). Otherwise non‑qualified → ordinary‑income tax rates (10 %–37 % + NIIT).
Partial redemption that does not affect “substantial” ownership	Same as above – dividend unless the “complete‑redemption” test is met.	Same as above.

Key take‑aways for the shareholder

Determine if the redemption is “complete”.
- Complete redemption: The shareholder’s entire interest in the corporation is terminated (or the shareholder has no “substantial” interest after the transaction).
- The IRS uses a “substantial interest” test – roughly, the shareholder must own < 50 % of voting power and < 50 % of the value of the corporation after the redemption (the exact thresholds are in Treasury Reg. §1.302-1(b)).
- If the shareholder still holds a meaningful number of CR plc shares after the buy‑back, the redemption will likely be treated as a dividend for the portion that represents a “distribution” and a capital‑gain for the part that is a “sale”. The “mixed” treatment can be complex; the broker usually reports the two portions separately (see “Form 1099‑DIV” vs “Form 1099‑B”).
Basis‑adjustment.
- If treated as a sale: The shareholder’s adjusted basis in the shares is reduced by any “return‑of‑capital” portion that is not a dividend. The gain = (redemption price – adjusted basis).
- If treated as a dividend: The basis is not reduced; instead, the dividend amount is excluded from the basis and may be subject to a “reduction” under Section 1245 if the dividend is a “return of capital” (i.e., the amount received exceeds the basis). The excess is a capital gain.
Reporting & Forms

Form	When it’s used	What it reports	Who files it
Form 1099‑B (Proceeds from Broker & Barter Exchange Transactions)	Sale‑like treatment (complete redemption)	Gross proceeds, cost basis (if known), dates	Broker (BNP Paribas) – to you & IRS
Form 1099‑DIV (Dividends and Distributions)	Dividend treatment (or portion of it)	Ordinary dividend, qualified dividend, capital gains distribution, foreign tax withheld (if any)	Broker / company
Form 8949 + Schedule D	To report capital gain/loss from a sale (if any)	–	Taxpayer
Form 1040 – Schedule B (if dividends)	–	–	Taxpayer
Form 1040 – Schedule D (for capital gain)	–	–	Taxpayer
Form 1116 (if foreign tax withheld)	Claim FTC if foreign withholding applied (unlikely for a redemption)	–	Taxpayer

Practical tip: Most brokers treat a share‑repurchase as “sale of stock” for U.S. shareholders (they issue a 1099‑B). If a “mixed” result is expected, the broker may send both a 1099‑B (for the “sale” part) and a 1099‑DIV (for the dividend part). Review the statements carefully; they will indicate how the broker classified it.

1.2. Specific U.S. Shareholder Scenarios

Shareholder type	Typical tax outcome for a typical “complete” redemption
Individual U.S. resident	Capital‑gain tax (long‑term if holding > 1 yr). No withholding; the shareholder reports the transaction on Form 8949/ Schedule D.
U.S. partnership	Same as individual: capital‑gain on the partnership’s “share” of the gain, reported on the partnership return (Form 1065) and passed through to partners.
U.S. C‑corporation	Capital‑gain (or dividend) passes through to the corporation and is subject to corporate income tax rates (21 % plus any state tax). No dividend‑receiving tax credit is available for foreign‑corporate dividends, but a dividend‑type payment would be ordinary corporate income.
U.S. REIT or S‑corp	The same capital‑gain rules apply; however, the distribution component (if any) might be taxable at the corporate level and then passed through.
U.S. tax‑exempt entity (e.g., 501(c)(3) charity)	Generally exempt from tax on qualified dividends and on capital gains if the entity is tax‑exempt. However, unrelated‑business‑income (UBI) rules may apply if the repurchase is considered an “investment” activity. Usually the charity receives a return of capital that is not taxable.
Non‑resident alien (U.S. citizen/green‑card holder)	Treated like a U.S. person for tax. For non‑resident alien (no U.S. tax residency) the dividend portion would be subject to 30 % U.S. withholding (or a reduced treaty rate) while the capital‑gain portion is generally not U.S‑source (the underlying asset is foreign). However, a “complete” redemption is normally treated as sale; the sale is not subject to U.S. withholding. The alien must file a U.S. return if there is any U.S.-source dividend.

1.3. Potential “Dividend‑treated” Portion & Withholding

If any portion is deemed a dividend (e.g., because the shareholder retained a “substantial” interest after the redemption), the U.S. withholding agent (BNP Paribas) must withhold 30 % (or reduced‑rate treaty amount) on the dividend portion and issue Form 1042‑S. That would be reported on Form 1099‑DIV with an indication of foreign tax withheld. The shareholder can claim a Foreign Tax Credit on Form 1116 (subject to limitations) for the amount withheld.

Note: In practice, most buy‑back announcements like this are “ordinary share repurchases” where the broker treats the proceeds as a sale. Therefore, most U.S. shareholders will see a **capital‑gain event and no withholding.

2. Tax Implications for the Company (CR plc)

2.1. Corporate‑tax viewpoint (U.S. tax code)

Issue	U.S. Tax Treatment	Impact on CR plc
Cost of shares	Not deductible under § 162 (ordinary business expense) – share repurchases are a capital transaction for the corporation, not a deductible expense.	The company cannot deduct the cash out‑flow. It reduces the equity (share‑capital + retained earnings) on the balance sheet.
Cancellation of shares	The cancellation is a reduction of the corporation’s capital; it is reflected in the share‑capital account and the “treasury stock” (if any) is eliminated.	No tax cost; reduces the number of shares outstanding, which can improve earnings‑per‑share (EPS).
Foreign‑ corporation‑U.S. tax considerations	As an Irish‑registered foreign corporation, CR plc is not a U.S. taxpayer for the repurchase itself (the transaction occurred in the U.S. but it is a foreign‑corporate purchase of its own stock). The company does not have a U.S. filing requirement merely for buying back its own shares unless it has a U.S. tax nexus (e.g., a U.S. branch, permanent establishment). The repurchase does not generate U.S. taxable income for CR plc.	No U.S. corporate‑income‑tax impact on CR plc’s U.S. tax return (if any).
U.S. withholding	No U.S. withholding is required on a non‑dividend repurchase.	The company does not have to remit any U.S. tax to the IRS.
Reporting to US regulators	The company must disclose the buy‑back under Regulation S‑K (or a local UK/EU equivalent) and may need to file a Form 8‑K if listed in the U.S. (CR plc is listed on the NYSE; the press release itself is a typical “Regulation S‑K/8‑K” filing). No U.S. tax filing is needed.	Disclosure only.
Potential foreign‑tax‑credit (FTC) effect	If the corporation had any U.S. source dividend paid to U.S. shareholders, CR plc could claim an FTC for foreign tax (but no dividend was paid).	No FTC impact.
Impact on withholding‑tax treaty	The transaction is a share redemption, not a dividend, so the Ireland‑U.S. Tax Treaty (Article 12 – Dividends) does not apply. No treaty‑based reduced‑rate withholding is required.	No treaty‑related withholding; no treaty reporting.
Capital‑account reduction	The cancellation reduces the “share capital” and “retained earnings” on the balance sheet, which may affect balance‑sheet ratios (e.g., debt‑to‑equity). No tax effect but may affect credit ratings and covenants.	Monitoring needed.

2.2. U.S. “CFC” considerations (if CR plc is a Controlled Foreign Corporation for U.S. shareholders)

If a U.S. person (or a U.S.‑owned partnership) owns ≥ 50 % of CR plc (directly or indirectly) the entity may be treated as a CFC (Controlled Foreign Corporation) under Subpart F and GILTI (Global Intangible Low‑Tax Income) rules.
Buy‑backs are non‑dividend events for Sub‑part F, so there is no Sub‑part F income recognized by U.S. shareholders.
The reduction in the shareholder’s basis does not create Sub‑part F income. However, if the buy‑back causes a distribution (e.g., a “return of capital” that exceeds basis), that excess may be treated as a dividend and therefore Sub‑part F income for U.S. shareholders.
For GILTI purposes, the share‑repurchase reduces the foreign earnings of the corporation but has no impact on the calculation of GILTI (which is based on net income). Therefore no GILTI effect directly arises from the buy‑back.

Bottom line: The repurchase is tax‑neutral for the foreign corporation (no deduction, no withholding, no Sub‑part F income) but will affect the equity structure and may affect covenant ratios.

3. Practical Checklist for Stakeholders

For U.S. Shareholders (individual or corporate)

Item	What to do	Deadline
Determine “complete‑redemption” status	Review the amount of shares held after the repurchase; compare to “substantial‑interest” thresholds (50 % voting, 50 % value).	As soon as you receive the broker’s statement.
Check the tax form you receive	- Form 1099‑B = sale (capital‑gain). - Form 1099‑DIV = dividend (or dividend + capital‑gain).	By mid‑February (when brokers send 1099s).
Calculate basis	Use original purchase price + any reinvested dividends; subtract any return‑of‑capital portion if treated as a dividend.	When preparing 2025 tax return.
Report on Schedule D / Form 8949	If sale – report on Schedule D (capital gain).	Form 1040 due 15 April 2026 (or 17 April if 2025 is a weekend).
Report dividend on Schedule B	If dividend – report on Schedule B (and possibly Form 1040, line for qualified dividends).	Same deadline.
If dividend and foreign tax was withheld	Claim Foreign Tax Credit on Form 1116 (subject to limit).	Same deadline.
Consult a tax advisor	Complex “mixed” treatment may require “split‑allocation” (portion sale, portion dividend).	ASAP after receipt.

For CR plc (the Company)

Item	Reason	Timing
SEC / UK/EU Disclosure	File a Form 8‑K (U.S. securities law) or the appropriate UK/Irish regulatory filing describing the buy‑back, the number of shares cancelled, and the cash paid.	Within 4 business days after the transaction (the press release already satisfies the timing).
Update the shareholder register	Reflect the cancelled shares and update total share count (used in EPS calculations).	Immediately after settlement.
No U.S. withholding	No dividend, so no withholding; ensure brokers have no “withholding” instructions.	Immediate.
Check covenant compliance	The reduction of equity may affect debt‑to‑equity ratios; confirm compliance with loan covenants.	Ongoing.
Record the transaction in accounting	Debit Retained Earnings (or Share Capital – reduction), credit Cash for the purchase price; the shares are cancelled (no Treasury‑stock entry needed).	At settlement date.
Communicate with shareholders	Include in the press release or a “shareholder‑update” that the transaction is a share buy‑back and that no dividend will be issued; set expectations for tax reporting (they’ll receive a 1099‑B).	In the press release (already done).

4. Summary of Tax Implications

Party	Tax treatment of the cash received by the shareholder	Corporate tax effect for CR plc
U.S. individual / trust	Usually capital‑gain (if a complete redemption) → long‑term or short‑term capital‑gain tax, no withholding. If not “complete”, the amount is treated as dividend → taxed at qualified‑dividend rates (or ordinary).	No deduction; reduction of equity.
U.S. C‑corp	Same as individual: capital‑gain (or dividend) → taxed at corporate rate (21 %). No foreign‑withholding.	Same as above; no deduction.
U.S. REIT / S‑corp	Same rules; the entity reports capital gain (or dividend) on the pass‑through return.	Same as above.
Non‑resident alien	Capital‑gain not U.S‑source (no withholding). If dividend, 30 % (or treaty‑reduced) withholding on dividend portion; can claim FTC if needed.	No U.S. tax, but a U.S. withholding may be required if the transaction is deemed a dividend.
CR plc (the corporation)	No tax on the cash paid; not a deductible expense. The transaction reduces share capital & retained earnings; no U.S. tax filing required for the repurchase; no withholding, no dividend‑tax.	No corporate income‑tax impact; equity reduction; possible impact on covenants and EPS.

5. Bottom‑Line Action Items

Shareholders – Confirm whether the repurchase qualifies as a “complete redemption.” If it does, treat the cash as a sale and report a capital‑gain (no withholding). If not, treat the cash as a dividend (qualified‑dividend if the holding period requirements are met) and pay ordinary or qualified‑dividend tax rates, with possible withholding.
CR plc – No U.S. tax liability on the repurchase; the only impact is a reduction in equity and a need to keep the shareholder‑register and public filings up‑to‑date.
Both parties should keep the broker’s Form 1099‑B (or 1099‑DIV if a dividend was deemed to have been paid) for their 2025‑tax‑return documentation and to confirm the correct classification.

Overall: For U.S. shareholders the transaction will most likely be a taxable capital‑gain (no withholding) provided the shareholder’s position after the buy‑back is “complete”. If a substantial interest remains, a dividend component may arise, which would be subject to dividend tax rates and, potentially, withholding. For CR plc, the buy‑back is tax‑neutral (no deduction, no withholding), but it reduces the company’s equity and may affect per‑share metrics and loan covenant calculations.

If you need a detailed “basis‑adjustment” worksheet or want to confirm the “complete‑redemption” status for a specific shareholder, let me know and I can walk you through a step‑by‑step calculation.