United States

Ninth Circuit withdraws opinion in Altera

TAX ALERT  | 

With the ink hardly dry, the U.S. Ninth Circuit Court of Appeals has withdrawn its July 24 opinion in Altera v. Commissioner – a ruling in favor of the IRS that overturned a 2015 unanimous U.S. Tax Court decision regarding the validity of a set of treasury regulations.

The July 24 Ninth Circuit opinion was a big win for the IRS, who appealed the U.S. Tax Court’s ruling that a set of regulations issued in 2003 were invalid as a result of the Treasury Department’s failure to satisfy the reasoned decision making standard established under relevant Supreme Court precedent. The Ninth Circuit ultimately disagreed with the U.S. Tax Court, holding that the IRS did not violate the rulemaking procedures required by the Administrative Procedures Act (APA) – thus, the regulations were valid. For more information on the Altera case, see our prior tax alert: IRS wins big in Altera appeal.

The withdrawal comes after an August second order that selected Judge Susan P. Graber to replace the late Judge Stephen Reinhardt, who passed away in March, five months after the October 2017 oral arguments, and comes a mere 14 days after the Ninth Circuit’s Altera opinion was originally issued. Judge Graber will now replace Judge Reinhardt on the three-judge panel that presides over the case.

The Ninth Circuit’s now withdrawn opinion was quite far-reaching, impacting taxpayers with qualified cost sharing arrangements based on the 2003 regulations, as well as a number of cases before the Tax Court with similar fact patters. It is not clear whether the 9th Circuit’s prior opinion will stand or whether it will be revised. Accordingly, taxpayers should be sure to stay tuned for more information, as new developments on this matter are sure to follow.

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