Treasury Has Options After Court Loss on Corporate Deduction Fix

The Treasury Department has an array of steps it can take in what will likely be a years-long legal battle over what it sees as a multi-billion dollar loophole in the 2017 tax overhaul.

A federal district court judge in Colorado—in a case brought by telecommunications company Liberty Global Inc. over a nearly $110 million dollar refund claim—held earlier this month that temporary Treasury rules blocking foreign-sourced corporate income from qualifying for a tax deduction were invalid.

Tax practitioners and former government officials said the big-dollar issue is far from settled. The federal government could opt to appeal, ...