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| Paige
Marvel is a new entry this year |
Transfer pricing litigation does not get to trial often. It
is a complex affair that usually demands lengthy preparation
– read, expense – and numerous participants,
often in the form of expert witnesses – read, more
expense. And there is the feeling that taxpayers would prefer
if they did not have to explain publicly how they worked out
their related-party policies. So practitioners everywhere were
waiting for the rarity that was Paige Marvel's US Tax Court
decision in Altera last July.
Marvel ruled the Treasury and Internal Revenue Service's
disregard for the Administrative Procedure Act meant that the
regulation, introduced after the government lost the
Xilinx case in 2005 – a decision affirmed by
the appeals court in 2010 – that the value of
stock-based compensation had to be included in a cost-sharing
agreement was invalid. Altera had argued that the regulation
was based on something that had already been rejected in
Xilinx because it was not deemed to be
arm's-length.
Marvel has been on the court for almost 18 years, having
been appointed by President Clinton in 1998 after a decade as a
partner of Venable. President Obama reappointed her to another
15 year term in 2014. She may not deliver a more significant
judgment than in Altera.