## Facts

- Deluxe Corporation operated a long-running treasury-share acquisition program authorizing repurchases of its common stock at current market-based prices in market and negotiated transactions.
- The program’s board resolution barred purchases from Deluxe’s officers and directors.
- Deluxe repurchased over 1.7 million shares from 1966–1979 in tens of thousands of transactions, none involving officers or directors.
- A private non-profit foundation exempt under § 501(c)(3) and treated as a private foundation under § 509 acquired more than 75,000 shares of Deluxe stock in 1974.
- To diversify its holdings, the foundation tendered its shares for redemption under the program; Deluxe completed six unsolicited redemptions in 1976–1977 totaling 75,000 shares.
- Deluxe paid the mean of the over-the-counter bid and asked prices as of the close of the prior business day for each redemption.
- The IRS assessed excise taxes under 26 U.S.C. § 4941, treating the redemptions as self-dealing between a private foundation and a disqualified person, and assessed related interest.
- After paying, Deluxe and the foundation sought refunds, asserting the redemptions fell within the corporate-redemption exception in 26 U.S.C. § 4941(d)(2)(F).
- The Claims Court held Deluxe liable for the excise tax (summary judgment for the government) but granted Deluxe partial summary judgment awarding a refund of interest.

## Issues

1. Whether the stock redemptions between Deluxe and the foundation were taxable acts of self-dealing under 26 U.S.C. § 4941.
2. Whether the § 4941(d)(2)(F) exception required that officers and directors be eligible to participate in the redemption program to satisfy the requirement that all shares be “subject to the same terms.”
3. Whether Deluxe was entitled to a refund of interest paid on the excise-tax assessments.

## Decision

- The Federal Circuit reversed the judgment imposing § 4941 excise-tax liability, holding the redemptions satisfied § 4941(d)(2)(F) and were not self-dealing.
- The court held that excluding officers and directors from the program did not defeat the “same terms” requirement of § 4941(d)(2)(F).
- The court affirmed the award of a refund of interest paid on the assessments.

## Legal Principles

- § 4941(d)(2)(F)’s “same terms” requirement focuses on uniform economic and contractual redemption terms offered to participating shareholders, not on whether insiders barred for governance or securities-law reasons may participate.
- A corporate policy excluding officers and directors from stock repurchases, when protective and non-preferential, does not by itself disqualify a redemption from § 4941(d)(2)(F).
- Redemptions priced by an objective market-based formula and conducted on an arm’s-length basis can satisfy § 4941(d)(2)(F)’s fair-market-value condition and fall outside § 4941’s self-dealing excise tax.
- When an excise-tax assessment is improper, associated interest paid on that assessment is refundable.

## Conclusion

The Federal Circuit held that Deluxe’s market-priced redemptions of a private foundation’s shares fit within § 4941(d)(2)(F) even though officers and directors were excluded from the program, eliminating § 4941 excise-tax liability and supporting a refund of related interest.


Deluxe Corp. v. United States, 885 F.2d 848 (Fed. Cir. 1989)