INTC Intel Corporation

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)

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