In an unusual move, the US Court of Appeals for the Ninth Circuit on Tuesday withdrew its July 24 opinion in Altera, which had concluded that IRS’s cost sharing regulations on the treatment of stock-based compensation are valid.
“The Opinions Filed July 24, 2018, are hereby withdrawn to allow time for the reconstituted panel to confer on this appeal,” the court said.
The three-judge appeals court panel was reconstituted because one of the judges joining in the original decision, Stephen Reinhardt, died before the Altera opinion was published. Judge Reinhardt has been replaced by Judge Susan Graber.
The withdrawn July 24 decision had overturned an earlier Tax Court decision that had invalidated Treas. Reg. § 1.482-7A(d)(2) because of Administrative Procedure Act violations. According to the Tax Court, the regs were invalid because Treasury did not adequately refute arguments advanced by commentators during the notice-and-comment period. The tax regulation in dispute requires employee stock compensation costs to be added to amounts allocated between cost-sharing agreement participants.
Interesting discussion of this development can be found in blogs by Professor Leandra Lederman of Indiana University and by Alan Horowitz of Miller and Chevalier.
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