IRS Wins Again in Closely Watched Intel Tax Case
June 07 2019 - 2:02PM
Dow Jones News
By Richard Rubin
A federal appeals court upheld tax regulations on certain
cross-border cost-sharing agreements within corporations,
delivering a victory for the Internal Revenue Service over Intel
Corp. in a case closely watched by tech companies.
The Ninth Circuit Court of Appeals ruled 2-1 on Friday for the
IRS over Altera Corp., now an Intel subsidiary. The court had
issued a similar ruling last year but heard the case again because
one of the judges, Stephen Reinhardt, died before the ruling was
issued.
Based on past disclosures, billions of dollars of federal tax
revenue could be at stake.
The case involves what is known as share-based compensation and
where it should be deducted as a business expense. The IRS wrote a
regulation that required companies to deduct more of it abroad as
opposed to deducting it in the U.S. Especially before the recent
tax law, companies had an incentive to claim those deductions
against the higher U.S. tax rate.
"We disagree with the Tax Court that the 2003 regulations are
arbitrary and capricious," wrote Chief Judge Sidney Thomas. "While
the rulemaking process was less than ideal, the [law] does not
require perfection."
Many companies, including Alphabet Inc., Facebook Inc., Twitter
Inc. and Electronic Arts Inc. have cited the outcome of the Altera
case as a risk in their financial statements.
The IRS and Intel didn't immediately comment.
Write to Richard Rubin at richard.rubin@wsj.com
(END) Dow Jones Newswires
June 07, 2019 13:47 ET (17:47 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
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