The 1 percent tax on company share repurchases that went into effect at the beginning of the year is beginning to add up, The Wall Street Journal reported.

Also known as the buyback tax, this provision of the Inflation Reduction Act had been projected to raise $74 billion over the next decade and to increase the effective tax rate from 17.56 percent to 17.95 percent for affected companies. The largest U.S. public companies’ tax burden collectively increased to more than $3.5 billion in the first half of the year, as businesses disclose their tax bills for the period’s share repurchases.

The tax will cost S&P 500 companies $1.6 billion in the second quarter, according to preliminary data from S&P Dow Jones Indices. That figure, down from around $1.98 billion in the first three months of the year, represents around 0.34 percent of the companies’ collective operating income for the second quarter, according to Howard Silverblatt, a senior index analyst at S&P Dow Jones Indices.

The tax is not significantly discouraging share repurchases among S&P 500 companies, Silverblatt told the Journal. “It’s an annoyance, a payment, but compared to earnings this quarter of about $458 billion, the $1.6 billion is not a lot,” he said. 

Booking Holdings estimated a buyback tax liability of $47 million, PayPal one of $24 million, and MetLife one of $13 million for the six months ending June 30, the Journal reported, citing regulatory findings.

The IRS suspended reporting and payment requirements stemming from the buyback tax while it works on guidance on the scope of the tax, said Mark Friedlich, vice president of government affairs at Wolters Kluwer Tax & Accounting who advises the Treasury Department, the IRS and Congress on various tax matters. This means companies will ultimately owe the 1 percent tax for affected buybacks from this year, but are not responsible for paying those obligations yet, he said, pending the guidance.

“I don’t think it’s going to be immediate once the guidance is issued,” Friedlich told the Journal, “but obviously with the divided government and all the politics around this, anything is possible.”

Proposals by President Joe Biden and Senate Democrats to quadruple the tax rate have raised expectations that it will go up eventually, Silverblatt said, but only to about 2 percent, an amount that could pass Congress. An increase to around 2.5 percent would likely cause companies to start to reassess their repurchase activity.

“The tax, if it becomes sizable enough, does dissuade you because it is sort of changing the arbitrage of how to return money to shareholders,” Liberty Energy CFO Michael Stock told the Journal.