Tax Court Relies on APA to Invalidate the Cost-Sharing Regulation Governing Stock-Based Compensation

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October 2, 2015

We present here a guest post from our colleagues Patricia Sweeney and Andrew Howlett. A longer version of this post is published here.

In Altera Corp. v. Commissioner, 145 T.C. No. 3 (July 27, 2015), the Tax Court put the IRS and Treasury on notice that, when promulgating regulations premised on “an empirical determination,” the factual premises underlying those regulations must be based on evidence or known transactions, not on assumptions or theories. Otherwise, the regulations do not comply with the requirements of the Administrative Procedure Act (“APA”), 5 U.S.C. § 551 et seq. Applying the arm’s-length standard … Read More

Summons Enforcement Update — Opening Brief Filed in Clarke and Briefing Ordered in Microsoft

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August 31, 2015

The government has filed its opening brief in the Eleventh Circuit in the Clarke case. The case is now back in that court for the second time after a remand from the Supreme Court that did not persuade the district court to retreat from its prior denial of an evidentiary hearing. See our previous report here.

On the merits, the appellants’ primary argument is that they are entitled to a hearing to explore their allegation that the government is misusing the summons enforcement process to obtain discovery for pending Tax Court proceedings. To that end, the appellants ask the … Read More

Update on Microsoft Hearing

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July 27, 2015

For those who have been wondering why they have seen no reports on the evidentiary hearing in the Microsoft summons enforcement case (see our previous report here), the hearing was postponed at the request of both parties.  It has been rescheduled for August 25.… Read More

Supreme Court Decision in Wynne Seeks to Clarify Commerce Clause Restrictions on State Taxation

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July 16, 2015

[Note:  Miller & Chevalier filed an amicus brief in this case on behalf of the National Association of Publicly Traded Partnerships]

As discussed in our previous report here, Comptroller of Maryland v. Wynne presented the Supreme Court with a tricky constitutional issue because it implicated some fundamental principles found in the Court’s precedents, but those principles did not all point in the same direction.  In particular, Maryland relied on a state’s unquestioned power to tax the income of its domiciliaries wherever earned, while the taxpayers relied on the Commerce Clause’s limitations on double taxation.

The Court’s 5-4 May 18 … Read More

Summons Enforcement Hearing in Microsoft Set for July 21

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July 9, 2015

While the Eleventh Circuit begins the process of reconsidering the Clarke summons enforcement case following the Supreme Court’s remand (see our prior reports here), a federal district court is poised to address similar issues much sooner in a case that has garnered extensive publicity.  (Incidentally, briefing is now underway in Clarke, with the respondents’ opening brief on appeal due on August 14.).

As most readers probably know, the government is engaged in a major transfer pricing audit of Microsoft in connection with its cost-sharing arrangements with affiliates in Puerto Rico and Asia.  The IRS has hired the … Read More

Eleventh Circuit Set to Consider Whether IRS Impermissibly Used Summons Power to Obtain “Discovery” in the Tax Court

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July 1, 2015

As we previously reported, the Supreme Court’s decision in the Clarke summons enforcement case was not a complete victory for the government.  The Court set forth a standard that appeared to leave a little more room than before for summoned parties to obtain an evidentiary hearing in resisting summons enforcement actions.  The Court left open the possibility that the lower courts on remand could require a hearing in Clarke itself at which IRS officials would have to testify.

The Eleventh Circuit elected not to address this question in the first instance after the Supreme Court remand.  Instead, it sent … Read More

Denial of Rehearing in MassMutual Tees Up Government Decision on Seeking Supreme Court Review of All-Events Test Issue

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June 29, 2015

Let me just begin with a brief apology to the regular readers of this blog for the infrequency of postings over the past several months.  A variety of factors and the press of other matters have interfered with blogging, but we are resolved to get back up to speed in the upcoming months by providing some analysis of intervening developments and posts on some new pending cases.

As we previously reported here, the Second Circuit and the Court of Federal Claims reached different results in considering the application of the all-events test to annual policyholder dividends paid by mutual … Read More

Fifth Circuit Reverses Tax Court in BMC Software

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March 17, 2015

The Fifth Circuit reversed the Tax Court’s decision in BMC Software yesterday. As we speculated that it might at the outset of the case here, the Fifth Circuit’s decision hinged on how far to take the legal fiction that the taxpayer’s accounts receivable created under Rev. Proc. 99-32 were deemed to have been established during the taxpayer’s testing period under section 965(b)(3). While the Tax Court treated that legal fiction as a reality that reduced the taxpayer’s section 965 deduction accordingly, the Fifth Circuit treated that legal fiction as just that—a fiction that had no effect for purposes of … Read More

Second Circuit Summarily Affirms in Barnes

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November 5, 2014

The Second Circuit did not make the parties wait very long to learn the outcome of the Barnes Group’s appeal from the Tax Court’s imposition of dividend treatment on its multi-step transaction that enabled it to use in the United States cash that was located in Singapore.  See our prior reports here and here.  Little more than a month after oral argument, the court of appeals today issued a summary order affirming the Tax Court in all respects.  The first page of such unpublished orders recites that they “do not have precedential effect,” but they can be cited in … Read More

Supreme Court Set to Hear Argument in Wynne on Constitutionality of Failing to Give an Income Tax Credit for Taxes Paid to Other States

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November 4, 2014

[Note:  Miller & Chevalier filed an amicus brief in this case in support of the taxpayers on behalf of the National Association of Publicly Traded Partnerships.]

Supreme Court briefing is now complete in Comptroller of the Treasury of Maryland v. Wynne, No. 13-485.  The issue presented is whether the U.S. Constitution requires a state to allow residents to take a credit against their state income tax liability for income taxes paid to other states on income earned in those states.

Maryland’s state income tax system taxes its residents at both the state level and the county level. Like other … Read More

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