Mark Allison Speaks to Law360 on Altera Corp.'s Failed Ninth Circuit Challenge

Law360 Tax Authority

Intel subsidiary Altera Corp.’s failed Ninth Circuit challenge to cost-sharing rules could tempt the U.S. Supreme Court to take up the case as a referendum on how much latitude the U.S. Treasury Department should have when writing and defending regulations.

. . .

If Altera were to draft a petition, it’s likely the company would try to leverage the court’s recent interest in the Auer deference issue, according to Caplin & Drysdale member Mark Allison.

He noted that Altera’s case isn’t viewed as an Auer issue, but rather as a case under Chevron or the 1983 Supreme Court case (Motor Vehicle Mfrs. Ass'n v. State Farm Mut. Auto. Ins. Co., 463 U.S. 29) Motor Vehicle Manufacturers Association of the United States Inc. v. State Farm Mutual Automobile Insurance Co. The high court’s ruling interpreted the Administrative Procedure Act’s standard for determining whether rules were “arbitrary and capricious.”

Altera could play into the interests of the Supreme Court’s two newest members, Justices Brett Kavanaugh and Neil Gorsuch, in pushing back on what they see as the extension of the administrative state, according to Allison.

While Altera probably wouldn’t submit a petition as a pure tax case, “a further piggyback off of Kisor might spark some interest,” he said.

. . .

The Tax Court hasn’t weighed in yet on another case like Altera’s, meaning there’s only a hypothetical circuit split, according to Allison.

“I think the notion of a hypothetical circuit split seems less likely to get the Supreme Court’s attention than one involving an actual split,” he said.

Even if the Tax Court were to rule against the IRS in a separate case that would be appealable outside of the Ninth Circuit, he said, the Supreme Court probably wouldn’t be interested unless that appellate court ruled a different way.

However, Allison added that generally, companies like Altera that develop intangibles are heavily concentrated in Silicon Valley and are therefore in the Ninth Circuit.

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