2008-02-25
The Third Circuit Court of Appeals recently reversed the Tax Court’s decision in Swallows Holdings Ltd v. Commissioner, 126 T.C. 96 (2006). The Tax Court had held that Treas. Reg. §1.882-4(a)(3)(i) was invalid.
Treas. Reg. §1.882-4(a)(3)(i) requires that a foreign corporation file a return within eighteen months of the filing deadline set in Code §6072 in order for the corporation to be able to claim deductions. In Swallows, the taxpayer filed the tax returns in question well after the expiration of the eighteen-month filing period.
The Third Circuit held that the Tax Court erred in applying the six factors provided in National Muffler Dealers Association v. United States, 440 U.S. 472, 477 (1979), to the extent that the National Muffler factors are inconsistent with the standard established in Chevron U.S.A., Inc. v. Natural Resources Defense Counsel, Inc., 467 U.S. 837 (1984).
The Third Circuit stated that:
The Secretary will, under the current regulation, allow a foreign company to file eighteen months after the filing was originally due. Moreover, because I.R.C. § 6072(c) already provides for a five and one-half month filing period, foreign companies have, in practice, twenty-three and one-half months to submit a “timely” return. It is not unreasonable for the Secretary to impose such a deadline.
Thus, Treas. Reg. §1.882-4(a)(3)(i) continues to be a valid regulation.