Historically, most SPACs were domiciled in Delaware. Since the IRS adopted its new 1% excise tax on stock buybacks (which became effective in 2023), however, the proportion of SPACs domiciled in Delaware seems to have been decreasing in favor of SPACs domiciled offshore, because non-U.S. entities are not subject to the excise tax. While not the only factor in considering whether to domicile in Delaware versus offshore, the excise tax has been a significant consideration for many seeking to form a SPAC recently. The excise tax impacts Delaware SPACs because a SPAC is required to conduct redemptions of its public stock (which are treated as buybacks) in certain circumstances. While there may be circumstances where the redemptions do not trigger the excise tax, it is possible that a SPAC could trigger the tax without having the necessary working capital to pay the tax or pass the tax liability on to the company with which it conducted a business combination. 

Apparently, there is an expectation that the excise tax rate could increase. An increase in the tax could lead to even fewer SPACs being formed in Delaware, not only depriving the State of Delaware of franchise taxes, but leading to more complex business combination transactions if a non-U.S. SPAC acquired a U.S. business.  

Those considering forming a SPAC now should the potential impact of the excise tax and the possibility that it could increases in the future.