Altera Corp. v. Commissioner, No. 16-70496 (9th Cir. 2019)Annotate this Case
At issue was the validity of the Treasury regulations implementing 26 U.S.C. 482, which provides for the allocation of income and deductions among related entities. The Ninth Circuit reversed the tax court's decision that 26 C.F.R. 1.482-7A(d)(2) was invalid under the Administrative Procedure Act (APA).
The panel held that the Commissioner did not exceed the authority delegated to him by Congress under section 482. In this case, section 482 did not speak directly to whether the Commissioner may require parties to qualified cost-sharing arrangements (QCSA) to share employee stock compensation costs in order to receive the tax benefits associated with entering into a QCSA, and the Treasury reasonably interpreted section 482 as an authorization to require internal allocation methods in the QCSA context and concluded that the regulations are a reasonable method for achieving the results required by the statute. Therefore, the panel held that the regulations were entitled to deference under Chevron, U.S.A., Inc. v. Natural Resources Defense Council, Inc., 467 U.S. 837 (1984). The panel also held that the regulations at issue were not arbitrary and capricious under the APA.
This opinion or order relates to an opinion or order originally issued on July 24, 2018.