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| Paige
Marvel was also in the Global Tax 50
2015 |
As the Chief Judge of the US Tax Court, Paige Marvel has
made it into this year's Global Tax 50 for her leadership and
the role of the court.
The US Tax Court has been decisive in two landmark cases in
2017, both of which involved the Internal Revenue Service (IRS)
– against Amazon in one case, and Eaton Corporation in
the other.
After almost 20 years at the US Tax Court, Marvel began a
two-year term as chief judge in June 2016. Marvel was first
appointed to the court by former President Bill Clinton in 1998
and, after serving a 15-year term, was nominated for a second
term in 2013 by the Obama administration. The nomination was
met with unanimous support from the US Senate Finance
Committee, and Marvel was reappointed to a second 15-year
term.
"Paige has demonstrated unwavering integrity and a firm
commitment to public service throughout her career," President
Obama said at the time. "I am proud to nominate her to serve
for another term on the United States Tax Court."
During Marvel's term as chief judge, the Tax Court ruled in
the favour of the taxpayer in the case of Amazon.com Inc. v
Commissioner. In this case, the IRS claimed that Amazon
undervalued the contribution of intangibles to the company's
Luxembourg subsidiary by more than $3 billion when Amazon
initiated a cost sharing arrangement (CSA) with the
subsidiary.
As part of this CSA, Amazon transferred intangible assets,
including software used to operate websites, as well as
marketing and customer information, to the Luxembourg
subsidiary. The US tax authorities argued that these assets
should be valued as components of a business operation and took
into account the projected cash flows for the company's
European operations.
Ultimately the US Tax Court ruled in Amazon's favour against
the IRS. Judge Albert Lauber rejected the arguments of the tax
authorities and found that the IRS had abused its discretion
and acted in an "arbitrary, capricious and unreasonable
manner". If the IRS had won the case, Amazon would have faced a
tax bill of $1.5 billion plus interest.
Similarly, in the case of Eaton Corporation and
Subsidiaries v Commissioner, the US Tax Court ruled that
the IRS had crossed the line when it cancelled two unilateral
advanced pricing agreements (APAs) covering the transfer of
intangible assets and cost sharing between Eaton's US
subsidiaries and its operations in Puerto Rico and the
Dominican Republic.
"What this case highlights is that APAs may not be reviewed
under principles of contract law. The Tax Court will apply the
abuse of discretion standard and focus on the 'self-imposed'
guidelines in the relevant revenue procedures," Mike Patton and
Mumi Hemrajani from DLA Piper said in an article published in
International Tax Review.
"Notwithstanding what appears to be a higher burden of
proof, the taxpayer was able to convince the court that it had
not made misrepresentations of material facts or engaged in
other conduct that justified the cancellations," Patton and
Hemrajani said.
These rulings have laid down important benchmarks for future
transfer pricing and tax disputes impacting multinationals, and
have ensured that the IRS treats taxpayers fairly. The
decisions taken by the Tax Court in these cases will likely
shape future decisions.