Global Tax 50 2017: Paige Marvel

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.