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IRS Win In Altera Cost-Sharing Row Withdrawn?

IRS Win In Altera Cost-Sharing Row Withdrawn?

On July 24, 2018 we posted IRS Cost-Sharing Regulations Revived By Appeals Court where we discussed that the Ninth Circuit reversed a decision by the U.S. Tax Court that invalidated an Internal Revenue Service cost-sharing regulation in a dispute with an Intel Corp. subsidiary, saying the revenue agency did not exceed its authority in promulgating the rule.  In a 2-1 decision, the appeals court said the IRS is entitled to deference and was justified in issuing the rule under the Administrative Procedure Act, despite comments from the public that opposed the regulation.

The Tax Court had sided with Altera Corp., an Intel subsidiary, in the case in July 2015 after finding that the IRS had ignored significant evidence and public comments while issuing its rule requiring cost-sharing agreements between related parties to include the costs of stock-based compensation.

Now according to Law360 on August 7, 2018 the Ninth Circuit withdrew its July 24 decision against Intel Corp. subsidiary Altera, letting stand a U.S. Tax Court decision invalidating IRS regulations that require employee stock option expenses to be shared with foreign subsidiaries in cost-sharing arrangements.

The now-withdrawn Ninth Circuit opinion that went against Altera Corp., an Intel Corp. subsidiary, represented a rare win for the Internal Revenue Service in a transfer pricing case.

The ruling was also unusual in that one of the judges voting with the majority, Stephen Reinhardt, had died in March, months before the opinion was issued.

The now-withdrawn ruling said Judge Reinhardt had “fully participated” in the case and “formally concurred in the majority opinion” before his death.

The one-sentence order withdrawing the ruling stated that the majority and dissenting opinions “are hereby withdrawn to allow time for the reconstituted panel to confer on this appeal.”

The case is Altera Corp. and Subsidiaries v. Commissioner of Internal Revenue, case numbers 16-70496 and 16-70497, in the U.S. Court of Appeals for the Ninth Circuit.

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Read more at: Tax Times blog

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