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U.S. Supreme Court denies certiorari, appeal from Ninth Circuit upholding cost-sharing regulations as valid

U.S. Supreme Court denies certiorari

The U.S. Supreme Court today denied a taxpayer’s petition for certiorari in an appeal from the Ninth Circuit that in 2019 had upheld as valid Treasury regulations requiring the sharing of stock-based compensation (SBC) costs between parties in a qualified cost-sharing arrangement (QCSA).


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The case is: Altera Corp. v. Commissioner, Docket no. 19-1009 (cert. denied June 22, 2020). Read the Court’s orders page [PDF 133 KB]

The U.S. Tax Court in 2015 found Treasury regulations under section 482—specifically, Reg. section 1.482-7A(d)(2) that requires participants in a QCSA to share the cost of employee stock-based compensation—were invalid. The Ninth Circuit in 2019 reversed the Tax Court’s 2015 opinion, and upheld the Treasury regulations as valid. Read TaxNewsFlash

Today, the U.S. Supreme Court denied certiorari. This leaves intact the Ninth Circuit’s decision that upheld the Treasury regulations, but the Tax Court’s unanimous opinion [PDF 121 KB] remains as a valid authority outside the Ninth Circuit. 

KPMG observation

The denial of certiorari raises many issues for taxpayers both within and outside the Ninth Circuit. Importantly, taxpayers must determine whether a filing position exists for a position that the regulations at issue are invalid, and address the accounting implications of any such position under Accounting Standards Codification 740. Other issues include how to make contractually mandated reverse clawback payments to share SBC costs from prior years, and how the requirement to share SBC costs affects the valuation of platform contribution transactions that were determined based on forecasts that excluded SBC costs.

Read a June 2020 report* [PDF 329 KB] prepared by KPMG LLP

*Reprinted with permission of the publisher

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