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KPMG joins amicus brief requesting en banc review by Ninth Circuit (cost-sharing arrangements)

Requesting en banc review by Ninth Circuit

In June 2019, the U.S. Court of Appeals for the Ninth Circuit reversed a 2015 decision of the U.S. Tax Court, which had invalidated a Treasury regulation under section 482 (Reg. section 1.482-7A(d)(2)) that requires participants in a qualified cost-sharing arrangement to share the cost of employee stock-based compensation. The case is: “Altera Corp. v. Commissioner.”


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The Ninth Circuit case was decided by a majority panel of two judges, and included a dissenting opinion.

Read a KPMG report providing initial impressions about the Ninth Circuit’s decision in June 2019: TaxNewsFlash

Today, KPMG LLP along with other professional services firms in the United States filed an amicus curiae brief in support of the taxpayer’s request for en banc review by the Ninth Circuit of the majority opinion.

In general, the amicus brief notes:

  • The case concerns the validity of regulations requiring the sharing of stock-based compensation costs in qualified cost sharing arrangements.
  • The panel majority decision by the Ninth Circuit (which upheld the challenged regulations) overturned a unanimous U.S. Tax Court opinion, leaving the law unsettled nationally. Due to the lack of uniformity arising from these opinions, an en banc rehearing would create further certainty in that the ultimate decision in this case—whatever that may be—would reflect the full court’s consideration and analysis.
  • Certain aspects of the majority opinion could be read to raise questions regarding the meaning and application of the arm’s length standard. An en banc rehearing would allow the full Ninth Circuit to better clarify its interpretation and application of the arm’s length standard.

Read the amicus brief [PDF 164 KB] (23 pages)


For more information, contact a KPMG tax professional:

Sean Foley | +1 408 878 7430 |

Mark Martin | +1 713 319 3976 |

Tom Zollo | +1 312 665 8387 |

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