New Panel, Same Result – Ninth Circuit Upholds Controversial Cost-Sharing Regulations In Altera Case

The unfolding Altera Corporation & Subsidiaries¹ v. Commissioner (Altera) saga bore witness to another taxpayer-unfriendly development on June 7, when the Ninth Circuit chose in a 2-1 vote to uphold certain Treasury Regulations that require treating stock-based compensation as a cost that must be shared among international entities participating in cost-sharing arrangements. Because cost-sharing arrangements usually allow for income to be allocated outside the U.S. to lower-taxed jurisdictions, this ruling means a hefty tax hike for many large tech companies that could otherwise choose to keep billions of dollars of deductible stock-based compensation expenses in the United States to offset their U.S. corporate income tax.