Tax Litigation

Orrick’s Tax Department has handled many hundreds of tax disputes in a wide variety of adversary proceedings, beginning at the audit level and continuing through the appellate courts. These proceedings have involved nearly all types of U.S. federal taxes, California taxes, as well as French income tax and VAT.

Our clients include a wide variety of domestic and foreign corporations, public entities, partnerships, tax-exempt entities, and individuals. Our experience is that it is best to become involved at the audit level because cases are often damaged or even lost at this stage by evidentiary failures, and so that we can work to minimize the number of issues raised on audit and to resolve potentially large disputes completely before they surface publicly.

Illustrative types of issues resolved administratively at the audit and appellate levels include attacks on a variety of tax shelter transactions, transfer pricing disputes, sale versus lease, mutual fund disqualification, fuel excise tax, wine excise tax, ITC and depreciation, deduction vs. capitalization, challenges to liquidations, reorganizations and spin-offs, subpart F income, U.S. property investments and foreign personal holding company income, bad debt reserves, cancellation of indebtedness, net operating loss ordering, stock dividends, and 482 issues. We currently represent an array of clients in confidential proceedings involving various “listed” transactions including son of BOSS, 351/357 and partnership basis shifting.

We have litigated federal income tax cases in the U.S. Tax Court, and valuation issues in income and estate and gift tax in the U.S. Court of Federal Claims, U.S. District Courts, and Courts of Appeal for the Federal, Third, Seventh, Ninth and Tenth Circuits. Issues on which we have prevailed in Tax Court range from arguing collateral estoppel over a fraud on the court defense, to the pioneering declaratory judgment on tax qualification of a “church,” to the tax exemption of housing bonds, to the court ordered suppression of IRS letter rulings under FOIA, to inbound “back-to-back” financing.

Representative cases we have litigated in federal tax matters include:

• Lucky Stores. The entitlement to Work Incentive (WIN) Tax Credits based on retroactive certifications by state welfare agencies in this case established a precedent for major employers throughout the U.S. and ultimately led to a retroactive change in law.
• Transamerica Corporation. Orrick obtained approximately $10 million when the Ninth Circuit upheld the propriety of the income forecast method of depreciating motion picture film costs.
• United Artists Record Corporation. Orrick secured the first reported allowance of investment tax credit (ITC) on record masters.
• The Harper Group. Orrick successfully litigated the leading captive offshore insurance case, prevailing in the Tax Court and the Ninth Circuit.

California tax litigation issues are a special expertise, including unitary and business/nonbusiness questions under California’s bank and corporation tax, the insurance company exemption, the special treatment of financial corporations, personal income tax residence issues, property tax “change of ownership” and sales and use taxes. Included is a large number of corporate and individual tax shelter cases in various stages of litigation in California. Most disputes involving California taxes have been resolved before the Franchise Tax Board, although we have conducted proceedings before the California State Board of Equalization, prevailing there in an important substance over form case for Transamerica Corporation in 1999. We have litigated in Superior Courts and District Courts of Appeal throughout California.