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Supreme Court Won’t Review Major Tax Case for Big Tech (1)

June 22, 2020, 1:32 PMUpdated: June 22, 2020, 5:22 PM

The Supreme Court decided not to review an appeals court decision upholding regulations on the tax treatment of assets shifted abroad in a case closely watched by technology giants.

The Monday denial comes after years of litigation between Altera Corp. and the IRS, in which the U.S. Court of Appeals for the Ninth Circuit upheld the regulations, overturning a unanimous ruling from the U.S. Tax Court. Altera Corp. is owned by Intel, which acquired the company after the 2004-2007 tax years at issue in the lawsuit.

The 2003 regulations governing those tax years required Altera to include stock-based compensation in the costs that would be governed by its cost-sharing arrangement with a foreign subsidiary. Such arrangements determine how transactions shifting intangible property such as patents or copyrights overseas are handled for tax purposes.

That compensation included stock options, which gave employees the right to buy company shares at a set price in the future. Altera disputed whether Congress had granted tax officials the authority to require that companies include stock-based compensation costs in their cost-sharing arrangements under the circumstances.

Apple, Google, and Facebook were just three among many companies that encouraged the high court to take up the case, saying in a brief that the Ninth Circuit’s decision would cost U.S. companies billions of dollars. Twenty-nine law professors submitted a brief on the side of the government at an earlier stage in the lawsuit.

Intel declined to comment on the decision.

The case is Altera Corp. v. Comm’r, U.S., No. 19-1009, cert petition denied 6/22/20.

(Updated sixth paragraph to note Intel declined to comment.)

To contact the reporter on this story: Aysha Bagchi in Washington at abagchi@bloombergtax.com

To contact the editors responsible for this story: Patrick Ambrosio at pambrosio@bloombergtax.com; Colleen Murphy at cmurphy@bloombergtax.com

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