Altera Corporation & Subsidiaries v. Commissioner of Internal Revenue, No. 16-70496 (9th Cir. 2018)
Annotate this Case26 C.F.R. 1.482-7A(d)(2), under which related entities must share the cost of employee stock compensation in order for their cost-sharing arrangements to be classified as qualified cost-sharing arrangements and thus avoid an IRS adjustment, was not invalid under the Administrative Procedure Act (APA). The Ninth Circuit reversed the tax court's decision declaring 26 C.F.R. 1.482-7A(d)(2) invalid and held that the challenged regulation was not arbitrary and capricious, but rather a reasonable execution of the authority delegated by Congress to Treasury. Therefore, the regulation was entitled to Chevron deference.
Court Description: Tax. The panel reversed a decision of the Tax Court that 26 C.F.R. § 1.482-7A(d)(2), under which related entities must share the cost of employee stock compensation in order for their cost-sharing arrangements to be classified as qualified cost-sharing arrangements and thus avoid an IRS adjustment, was invalid under the Administrative Procedure Act. The panel reasoned that the Commissioner of Internal Revenue did not exceed the authority delegated to him by Congress under 26 U.S.C. § 482, that the Commissioner’s rule-making authority complied with the Administrative Procedure Act, and that therefore the regulation is entitled to deference under Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). Dissenting, Judge O’Malley would find, as the Tax Court did, that 26 C.F.R. § 1.482-7A(d)(2) is invalid as arbitrary and capricious.
The court issued a subsequent related opinion or order on August 7, 2018.
The court issued a subsequent related opinion or order on June 7, 2019.
The court issued a subsequent related opinion or order on November 12, 2019.
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