Treasury’s Move in Dividend Deduction Rules May Spur Legal Fights

Legal questions are brewing now that Treasury has finalized rules that limit a deduction and a tax exception taxpayers can get on certain foreign dividends.

Treasury defended its authority when it issued the final rules, arguing that they are necessary and appropriate and properly honor Congress’s intent for the deduction under tax code Section 245A, as well as for a tax exception under Section 954(c)(6). But critics said a court may end up tossing out the rules for going beyond the boundaries of the rule-writing authority Congress gave Treasury in the tax code.

“No one’s going to ...