Ninth Circuit Denies Request for En Banc Hearing by Altera

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We have written about Altera v. Commissioner on many occasions because it was such an important decision by the Tax Court and because of the interesting twists in the case at the circuit level.  We have written many posts on this case.  You can find some here, here, here, here and here.  Today, the Ninth Circuit has rejected the request for an en banc hearing.  The rejection of the request is here.  Three judges dissented from the decision not to hear the case en banc.  This leaves Altera with the decision to press on to the Supreme Court or to accept the decision.  For those not following the case, the issue concerns the manner in which the IRS promulgated the regulations.  The Tax Court was so uncomfortable with the process that it struck down the applicable regulations in a unanimous vote of the full court.  The Ninth Circuit panel reversed the Tax Court in a 2-1 vote.


  1. Major kudos to the government team, first for having the guts to appeal an unanimous en banc TC decision and then for winning while being seriously outgunned. This also breaks a long government losing streak on major transfer pricing cases.

    At the end of the day, it’s the right result from a transfer pricing perspective. It makes no sense to treat stock-based compensation differently than cash-based compensation, benefits, rent, etc. They are all costs that should be shared when incurred by cost centers developing IP under a CSA. Finding otherwise would elevate form (“we don’t get billed stock-based comp by third-party contractors and, therefore, we shouldn’t bill stock-based comp to affiliates”) over substance (“third party contractors want to make a profit and, to do that, they must consider all their costs, including all comp costs, when setting their fees — even if they don’t explicitly refer to stock-based comp in a contract or invoice.”)

    The Tax Court lost sight of the “big picture” after Treasury chose to ignore its prior decision by amending the regulation in a sloppy way.

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