Quick Takes: Altera, Senate Finance Committee Testimony on IRS Reform

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I am trying to meet a deadline before a last gasp of summer vacation in California, and I have had a little less time than usual for blogging.  Tax procedure and tax administration developments wait for no one, however, and much has been happening this week. I will briefly discuss and add some links to two major developments: the Altera case and the Senate Finance Committee Subcommittee on Tax and IRS Oversight hearing.


As I am sure many readers know, the Ninth Circuit reversed the Tax Court in the heavily anticipated case of Altera v Commissioner, a case we have blogged numerous times. The basic holdings in the Ninth Circuit case all involved the broader question as to whether Treasury exceeded “its authority in requiring Altera’s cost-sharing arrangement to include a particular distribution of employee stock compensation costs.”

The Ninth Circuit, in a divided opinion that included now deceased Judge Stephen Reinhardt in the majority, concluded that the Treasury did not. In so doing, it held that Treasury did not violate the APA in its rulemaking, and under Chevron the court deferred to Treasury’s take on the substantive issue of allocation of employee stock compensation costs.

We will have more on this decision in PT. In the meantime, here are some comments on the decision in the blogosgphere:

Dan Shaviro in Start Making Sense trumpets the 9thCircuit getting to the right outcome

Leandra Lederman in The Surly Subgroup, who like Professor Shaviro wrote an amicus arguing for reversal, succinctly summarizes the holding

Jack Townsend, who in his Federal Tax Procedure blog, in addition to linking to his excellent and free tax procedure book offers his take on the case, including his gloss on Chevron and his forecast that if the Supreme Court gets to this one there is a good chance for the Supremes “screwing it up”

Chris Walker at Notice and Comment who expresses unease about the process, especially the aspect of including as part of the majority a judge who passed away prior to the Court’s issuing the opinion

Alan Horowitz at Miller & Chevalier’s Tax Appellate blog, discussing the holding and likely petition for rehearing by the full circuit

Senate Hearing on Tax Administration

The Senate Finance Committee’s Subcommitte on Taxation and IRS Oversight had a hearing yesterday on improving tax administration.

Here is a link to the audio; witnesses, whose written testimony is linked above, were

  • Caroline Bruckner, Managing Director of the Kogod Tax Policy Center at American University ;
  • Phyllis Jo Kubey, Member of the National Association of Enrolled Agents and the IRS Advisory Council ;
  • Nina Olson, the National Taxpayer Advocate ;
  • John Sapp, the current Chair of the Electronic Tax Administration Advisory Committee advising the Internal Revenue Service, and
  • Rebecca Thompson, the Project Director of the Taxpayer Opportunity

Senator Portman’s introductory statement is here—in it he notes the 20thanniversary of the IRS Restructuring and Reform Act, and how he and Senator Cardin recently introduced the Taxpayer First Act(following the House passing its version of legislation).

The National Taxpayer Advocate blogged on the hearing, including her take encouraging “everyone who cares about improving tax administration to watch the hearing and read the testimony submitted.”

Avatar photo About Leslie Book

Professor Book is a Professor of Law at the Villanova University Charles Widger School of Law.


  1. I wondered if cost-sharing agreements had something to do with ride-sharing companies. They don’t. Rather, they involve global companies that allocate some of their expenses to foreign subsidiaries, not in a way to increase their United States taxes.

    I also wondered what Altera does. Checking Wikipedia, I find that Altera Corporation is an American manufacturer of programmable logic devices (PLDs), which are used to build reconfigurable digital circuits. . No home should be without one. In 2015, Intel acquired Altera in an all-cash transaction valued at approximately $16.7 billion.

    This case involves Altera’s 2005 return, which was the subject of a Tax Court case filed in 2012 and decided in 2015. IRS assessed about $5.5 million. Altera appealed.

    That’s not much more than small change for Altera (now Intel). Meanwhile, about twice as much small change is involved in a case that Amazon won in Tax Court in March 2017 (148 TC 8). In that case, the Tax Court relied on its Altera decision, while acknowledging the IRS appeal to the 9th Circuit appeal was pending.

    In the 9th Circuit case, Amazon has many friends. An amicus brief was filed earlier this month by Semiconductor Industry Association, Information Technology Industry Council, National Foreign Trade Council, Software Finance and Tax Executives Council, and TechNet. Another amicus brief was filed the same day by Silicon Valley Tax Directors Group; Agilent; Cisco; Dell Technologies; Dolby; Expedia; FireEye; Genesys; Informatica; NetApp; Palo Alto Networks; SurveyMonkey; and Vmware. A week earlier, one was filed by the Chamber of Commerce of the United States of America.

    For those keeping score at home, it may be difficult to decide which side to support — IRS, or Big Business? It may be like a Dodgers fan, watching a Yankees and Red Sox game. It doesn’t matter who wins, they’re not even in the same league, but you can always learn something from how the game is played.

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