Ninth Circuit Withdraws Reversal of Tax Court Ruling

The Ninth Court of Appeals published a decision on July 24, 2018, that reversed the judgement of the Tax Court by 2-1, ultimately creating a win for Internal Revenue Service involving allocation of expenses between domestic and overseas operations of a corporation. However, the judgement was then withdrawn due to the death of appeals court judge Stephen Reinhardt on March 29, 4 months before the decision’s publication. The Ninth Circuit decided to withdraw the decision “to allow time for the reconstituted panel [which will include replacement judge Susan Graber] to confer on this appeal.”

The Tax Court had had invalidated the regulations under Section 482 of the Tax Code that require that related entities must share the cost of employee stock compensation in order for their cost-sharing arrangements to be classified as qualified cost-sharing arrangements, and thus avoid an IRS adjustment. The IRS had determined deficiencies against Intel’s corporation Altera under the section.

Judge Stephen Reinhardt had been one of the two judges that had voted for the reversal of the Tax Court’s decision, in effect re-validating Section 482 of the Tax Code. If Reinhardt’s vote is discounted, the court is evenly split, and it appears now to await the decision of his successor, Judge Susan Graber.

See Roger Russell, Ninth Circuit Withdraws Reversal of Tax Court Ruling, Accounting Today, August 8, 2018.

Special thanks to Jim Hillhouse (Professional Legal Marketing (PLM, Inc.) for bringing this article to my attention.