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Google, Facebook, Apple Weigh in on Altera Tax Case

Aug. 2, 2019, 6:39 PM

Intel-owned Altera Corp. received more industry backing as some of the biggest names in tech and tax urged the Ninth Circuit to review a cross-border tax case with potentially billions of dollars at stake.

In multiple briefs, the giants urged the U.S. Court of Appeals for the Ninth Circuit to hold an en banc rehearing after a panel upheld Treasury regulations affecting taxes on certain transfers within multinational companies. The companies behind the Aug. 1 briefs include Google LLC, Apple Inc., Facebook Inc., PepsiCo Inc., PwC, Deloitte Tax LLP, KPMG LLP, and the National Association of Manufacturers.

Altera wants the Ninth Circuit to review the June 7 ruling that Treasury acted lawfully in requiring related parties—such as entities within a multinational company—to share the costs of stock-option compensation in qualified cost-sharing agreements. These are agreements to share the costs of developing property in exchange for sharing income generated by the property.

The Briefs

The panel’s decision to uphold the Treasury regulations “threatens to shatter the hard-won but fragile international consensus on treatment of hundreds of billions of dollars of intercompany payments, Apple, Google, Facebook, PepsiCo and others said in their brief. The companies said they do “hundreds of billions of dollars’ worth” of intercompany transactions that are subject to regulations under tax code Section 482, which include the regulations at issue in Altera.

If the decision stands, there could be uncertainty because the U.S. Tax Court might treat cases that aren’t appealable to the Ninth Circuit differently from the Ninth Circuit approach, PwC, Deloitte Tax, and KPMG said in their brief. Before the Ninth Circuit panel decision, the Tax Court had ruled unanimously against the IRS. “The practical consequences are thus akin to a circuit split, which would itself warrant en banc review,” they said.

The three professional services firms also said the lack of uniformity would directly affect “the tax and financial reporting of billions of dollars.” They also worried there could be more disputes on how to value transferred assets, “which would impose significant costs on both multinational enterprises and taxing authorities.”

“The regulation approved by the panel majority is a textbook example of agency rulemaking run amok,” the National Association of Manufacturers said in its brief. The group said it is worried about consequences across executive agencies. “The opinion, if allowed to stand, will open the door to regulatory abuses by agencies across the executive branch, be it the EPA, HHS, or ICE,” it said.

Steptoe & Johnson LLP represented the National Association of Manufacturers and others.

Morgan, Lewis & Bockius LLP represented Cisco Systems Inc., Google, Apple, Facebook, PepsiCo, and others.

Latham & Watkins LLP represented PwC, Deloitte, and KMPG.

The case is Altera Corp. v. Commissioner, 9th Cir., No. 16-70496, amicus brief filed 8/1/19.

To contact the reporter on this story: Aysha Bagchi in Washington at

To contact the editors responsible for this story: Patrick Ambrosio at; Karen Saunders at