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INSIGHT: Altera v. Commissioner—Administrative Procedure Act Under Siege?

Bloomberg Tax: Daily Tax Report

01 Aug 2019
Reprinted with permission.

The Ninth Circuit recently overruled the U.S. Tax Court on a significant question regarding the validity of Treasury’s final cost-sharing regulations governing stock-based compensation.

The Tax Court had previously ruled in a 15-0 decision that the promulgation of these regulations violated the Administrative Procedure Act (the APA) which is codified at 5 U.S.C. Sections 701-706. The Tax Court decision can be found at 145 T.C. 91 (2015).

Two appellate judges embraced the government’s view that Treasury had met the requirements of the APA. The dissenting judge found just the opposite and agreed with the Tax Court. The majority, in a signal that it had little concern with the APA issue, took up a secondary analysis under Chevron first. By doing so it created rhetorical momentum to discard the Tax Court’s analysis and the taxpayer’s own APA-based arguments. Altera has recently petitioned for a rehearing en banc in part on the grounds that the majority decision ‘‘turns the APA on its head.’’

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