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Court Delivers FedEx Huge Victory in FTC Offset Earnings Dispute

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Court Delivers FedEx Huge Victory in FTC Offset Earnings Dispute

  • By Andrew Velarde

The U.S. District Court granted FedEx a crucial victory in an $89 million foreign tax credit dispute, invalidating a Treasury regulation limiting credits on offset earnings from loss-making subsidiaries by ruling in favor of FedEx under Chevron step 1 analysis. The court ruled against the government's interpretation of section 965(b)(4)(A), stating that the approach contradicts the ordinary and common meaning of "for purposes of" as limiting language and creates unintended consequences in the application of sections 959 and 960. The court's decision in FedEx Corp. v. United States may have broader ramifications, potentially affecting taxpayers with similar disputed amounts and the government's use of interlocking rules in other contexts.

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