IRS Kicks Off Post-Altera Audit Adjustments

Taxpayers with cost sharing arrangements ("CSAs") can again expect close audit scrutiny-and potential adjustments-related to their treatment of stock-based compensation ("SBC") costs. On June 22, the Supreme Court denied certiorari in Altera, letting stand the decision of the U.S. Court of Appeals for the Ninth Circuit upholding the validity of the IRS regulation requiring the sharing of SBC costs under a CSA. The IRS had suspended audit adjustments based on the regulation while the case was pending, but since the Supreme Court declined review, it has announced its intent to audit and adjust taxpayers with Altera issues, i.e., those that have not been sharing SBC costs under their CSAs, in all Circuits, not just the Ninth.