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June 28, 2020

U.S. International Tax This Week for June 26

Ernst & Young's U.S. International Tax This Week newsletter for the week ending June 26 is now available. Prepared by Ernst & Young's International Tax Services group, this weekly update summarizes important news, cases, and other developments in international taxation.


The US Supreme Court announced on June 22 that it was denying the petition for certiorari for Altera Corporation & Subsidiaries v. Commissioner. Altera filed the petition asking the Supreme Court to review a decision of the Ninth Circuit Court of Appeals upholding the 2003 version of Reg. Section 1.482-7, which requires participants to include stock-based compensation costs in a cost-sharing arrangement.

In 2003, the Treasury and the Internal Revenue Service (IRS) issued the 2003 regulations, which require stock-based compensation costs to be included in intangible development costs, which participants in a cost-sharing arrangement share. In July 2015, the Tax Court ruled that the 2003 regulations were invalid under the Administrative Procedure Act. The Tax Court found that Treasury's conclusion that the final rule was consistent with the arm's-length standard was contrary to the evidence before it, namely that unrelated parties, acting at arm's length, would never agree to share each other's stock-based compensation costs.

On 7 June 2019, in a 2-1 opinion, a Ninth Circuit panel reversed the Tax Court's holding and ruled that the 2003 regulations complied with the Administrative Procedure Act. The Ninth Circuit found that the Government had adequately supported in the record that stock-based compensation should be treated as an intangible development cost in a cost-sharing arrangement and Treasury's position on the issue was not a policy change.

The Supreme Court's denial of the petition for certiorari is important because the Ninth Circuit's decision stands. Companies within the Ninth Circuit must consider the Ninth Circuit decision concerning the inclusion of stock-based compensation in the cost-sharing agreement. Companies outside the Ninth Circuit must now consider how the Supreme Court's denial to hear the petition impacts their tax positions under the 2003 regulations. To this end, the 2015 Tax Court decision holding that the 2003 regulations were invalid, remains relevant precedent outside the Ninth Circuit. EY Tax Alert 2020-1626 has details.

In the wake of Treasury Secretary Steven Mnuchin's call for a pause in OECD negotiations to develop a new regime for taxing local profits of global companies under Pillar 1 of the BEPS 2.0 project, Pascal Saint-Amans, Director of the OECD's Centre for Tax Policy and Administration, reiterated on 24 June that the talks are still alive. "The U.S. has said … they are engaged, they want a solution, but we should shift it to 2021, or at least [until] after the [US] election." The comments were reportedly made during a press-sponsored webinar and suggested more details might emerge after the scheduled G-20 Finance Ministers meeting in July. "What is for sure is that … we keep working, we're alive, we are not on life support," Saint-Amans said. "COVID has not done too much harm yet on this, but we recognize the difficulties."

Upcoming Webcasts

How companies are addressing impairment considerations on goodwill and other long-lived assets (July 16)
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Recent Tax Alerts


— Jun 25: Zambia announces termination of double taxation agreement with Mauritius (Tax Alert 2020-1667)

— Jun 25: South Africa's Minister of Finance delivers 2020 Supplementary Budget review (Tax Alert 2020-1666)

— Jun 22: Kenya introduces VAT regulations on supply of digital services (Tax Alert 2020-1628)

— Jun 19: Tanzania's Parliament passes Finance Bill, 2020 (Tax Alert 2020-1617)


— Jun 25: China announces masterplan for Hainan Free Trade Port (Tax Alert 2020-1664)

— Jun 22: Thai Cabinet approves VAT bill regarding taxation of foreign e-business (digital services) (Tax Alert 2020-1632)

Canada & Latin America

— Jun 25: Trinidad and Tobago issues Mid-Year Budget Review 2020 (Tax Alert 2020-1663)

— Jun 22: Colombia updates regulations on tax incentives for investments in renewable energy sources (Tax Alert 2020-1631)

— Jun 22: Uruguayan Executive Power issues decree establishing tax incentives to encourage investments (Tax Alert 2020-1630)

— Jun 22: Uruguay's Executive Power adds new conditions under which individuals may obtain tax residence (Tax Alert 2020-1627)

— Jun 19: Uruguay's Executive Power extends tax incentives for construction activities (Tax Alert 2020-1613)

— Jun 19: Costa Rica's tax authorities published guidance on charging and collecting of VAT on cross-border digital services and intangible assets (Tax Alert 2020-1612)


— Jun 25: EU reaches agreement on postponement of VAT e-commerce rules due to COVID-19 crisis (Tax Alert 2020-1665)

— Jun 25: Council of the EU adopts amendments for deferral of MDR filing deadlines (Tax Alert 2020-1661)

— Jun 24: UK Tax Authority publishes update on current delays in processing and refunding VAT under Overseas Refund Scheme (Tax Alert 2020-1655)

— Jun 24: Poland defers certain provisions of new withholding tax reform to 1 January 2021 (Tax Alert 2020-1654)

— Jun 24: Greece implements electronic accounting books and e-invoicing process (Tax Alert 2020-1653)

— Jun 24: Belgium reduces VAT rates for restaurant services (Tax Alert 2020-1652)

— Jun 23: Cyprus adopts legislation implementing exit taxation and hybrid mismatch rules (Tax Alert 2020-1642)

— Jun 23: Bulgaria reduces VAT rates for certain sectors (Tax Alert 2020-1641)


— Jun 23: Australian Taxation Office publishes guidance on COVID-19 economic impacts on transfer pricing arrangements and altering related party arrangement (Tax Alert 2020-1646)

— Jun 22: New Zealand introduces new omnibus tax Bill (Tax Alert 2020-1633)

Additional Resources

Ernst & Young Client Portal, the leading source for news, analysis, and reference materials for corporate tax professionals, has a variety of content of interest to international tax practitioners, including:

International Tax Online Reference Service. Key information about, and important tax developments from, 56 foreign jurisdictions, including information on tax rates, interest rates and penalties, withholding, and filing dates.

EY/Passport. EY/Passport is your guide to planning ventures in the global economy, offering a wealth of tax and business knowledge on more than 150 countries.

Because the matters covered herein are complicated, U.S. International Tax This Week should not be regarded as offering a complete explanation and should not be used for making decisions. Any decision concerning matters covered herein should be reviewed with a qualified tax advisor.