Xilinx, Inc. v. Commissioner of Internal Revenue

Case Updates

The Ninth Circuit ruled that circuit device manufacturer Xilinx, Inc. was not required to share the cost of employee stock options with a foreign subsidiary.

NCLC urged the U.S. Court of Appeals for the Ninth Circuit to reconsider the decision of a three-judge panel that virtually guarantees double taxation by permitting related corporations to be taxed differently from unrelated corporations. The case arises out of a tax deficiency assessed by the IRS against circuit device manufacturer Xilinx, Inc. for claiming business expense deductions for the exercise of stock options issued to its employees involved in research and development (R&D). The IRS contended that under Section 428 of the Internal Revenue Code, Xilinx should have shared the cost of the employee stock options with its foreign subsidiary Xilinx Ireland, thereby reducing the taxpayer company's deductions and increasing its taxable income. In its brief, NCLC argued that the Ninth Circuit's decision is a significant departure from domestic tax law, international treaty obligations, and the settled expectations of U.S. companies and their foreign subsidiaries.