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9th Circ., For the Second Time, Revives IRS Cost-Sharing Rule In Altera!

  • 2015 Tax Court decision. The Tax Court held that Reg. § 1.482-7A(d)(2) was invalid because it failed to satisfy State Farm 's reasoned decision-making standard. (Altera Corporation and Subsidiaries, (2015) 145 TC 91)
  • CA 9 reversed, upholds reg. The Court of Appeals for the Ninth Circuit, on July 24, 2018, reversed the Tax Court and upheld the reg. It said that IRS's rule-making complied with the APA, and its reg is entitled to Chevron deference. A dissenting opinion would have rejected the reg, for reasons similar to those of the Tax Court. (Altera Corporation and Subsidiaries v. Comm., (CA 9 7/24/2018) 122 AFTR 2d ¶2018-5068)
  • One of the judges that was part of the majority in the case died after oral arguments in October 2017 but before the decisions were released in July 2018.
  • CA 9 withdrew its opinion. The Ninth Circuit withdrew both the majority and dissenting opinions filed on July 24th, allowing time for a "reconstituted panel" of judges to confer (i.e., with a new judge taking the place of the deceased judge).
  • CA 9 upholds the regs again – The court first held that the reg did not exceed the authority delegated to IRS under Code Sec. 482. The court also explained that Code Sec. 482 does not speak directly to whether the IRS may require parties to a QCSA to share employee stock compensation costs in order to receive the tax benefits associated with entering into a QCSA. 
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Read more at: Tax Times blog

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