Excerpt taken from the article
WASHINGTON (Reuters) - Altera Corp and the Internal Revenue Service are battling in U.S. Tax Court over the semiconductor maker's handling of employee stock-based compensation and a unit in the low-tax Cayman Islands.
The dispute centers on "transfer pricing," or how multinational companies allocate assets and money globally with the goal of reducing their tax bills. Other tech companies will be watching the Altera case, lawyers said.
The IRS, seeking $27 million in tax payments, contends that from 2004-2006 Altera wrongly booked expenses for employee stock-based compensation in the United States where the expenses were tax deductible, according to court records.
The dispute replays a tax fight over transfer pricing that the IRS waged for years with Xilinx Inc, an Altera rival in the semiconductor market. Xilinx sued the IRS in January 2003 - before the IRS issued rules on transfer pricing - and won on appeal in March 2010, leading to one-time tax savings.
IRS Commissioner Doug Shulman made changes in mid-2010 that revamped the agency's transfer pricing operations. Samuel Maruca was hired last year to run the IRS transfer pricing division.
"I'd be interested to see if Maruca's presence or any of that makes a difference in how this (Altera) case is litigated," said David Rosenbloom
, a lawyer with Caplin & Drysdale.
"The IRS did a very poor job litigating Xilinx," he said. Click here to read the entire article on the Altera, U.S. cross-border tax case