Cost Sharing, Stock-Based Compensation, and Other Lessons From Altera | Tax Notes International

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Tax & Customs

Caio Malpighi, associate in Tax & Customs practice, in co-authorship with Professor John I. Forry, has published an article in Tax Notes International addressing whether stock-based compensation costs used to remunerate employees engaged in intangible development activities must be included in the cost pool of cost sharing arrangements.

The study adopts a case-law analysis methodology and is grounded in a critical assessment of the rule of law established in Altera Corp. v. Commissioner, as decided by the U.S. Court of Appeals for the Ninth Circuit. The article results from joint research and discussions between Caio and John, who served as counsel to one of the amici curiae in the Altera appeal.

The matter remains highly relevant to multinational groups engaged in cost sharing arrangements involving intangibles and continues to fuel debate on the application of the arm’s length principle, the commensurate with income standard, and the treatment of hard-to-value intangibles in intercompany transactions.

The issue may soon be revisited from a new perspective in McKesson Corp. v. Commissioner, currently before the U.S. Court of Appeals for the Fifth Circuit, which precisely addresses the validity of U.S. Treasury’s regulations requiring the inclusion of stock-based compensation costs in cost sharing arrangements.

Check here the link to the live article.

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