A Second Bite at the APA: Altera's Rehearing and the Potential Invalidity of Cost-Sharing Regulations

U.S. multinationals, particularly those in the tech industry, are anxiously awaiting the outcome of the taxpayer's appeal to the Ninth Circuit of the Tax Court's decision in Altera v. Commissioner. The issue to be decided is whether the costs associated with awarding equity compensation to the employees of a multinational group must be shared by foreign affiliates, thereby reducing the amount of taxable income that has been shifted to such affiliates through cost-sharing agreements.. 

The Ninth Circuit released its opinion, ruling against the taxpayer, but then withdrew the opinion and set the case for rehearing.  Oral arguments occurred last week and the final opinion is expected soon. 

Because of importance of the case, Orrick attorneys Peter Connors, Barbara de Marigny and Mike Rodgers have prepared an in-depth article that examines the background, the parties' positions, supporting authorities and offers views as to the potential outcome.