Global intangible low-taxed income
Keysight Technologies Inc. v. United States
Date: July 2, 2026
Issue: Whether the Department of the Treasury exceeded its statutory authority by issuing Treasury Regulation Section 1.951A-2(c)(5), which implements the global intangible low-taxed income (GILTI) provisions of the Tax Cuts and Jobs Act of 2017.
Case Summary: In one of the first major applications of Loper Bright Enterprises v. Raimondo, the U.S. Court of Federal Claims ruled the U.S. Department of the Treasury lacked the statutory authority to promulgate Treasury Regulation Section 1.951A-2(c)(5).
In Loper Bright, the U.S. Supreme Court struck down Chevron deference and held that courts may not defer to an agency’s interpretation of the law simply because a statute is ambiguous. Instead, Loper Bright requires courts to exercise their independent judgment in deciding whether an agency acted within its statutory authority.
In January 2025, Keysight Technologies Inc. sued the Treasury and the Internal Revenue Service (IRS, collectively the government), challenging Treasury Regulation Section 1.951A-2(c)(5), which implements the GILTI provisions of the Tax Cuts and Jobs Act of 2017. GILTI requires U.S. companies to pay tax on certain income earned by their foreign subsidiaries in the year it is earned, rather than when the income is returned to the United States. Congress’s GILTI regime created different tax treatment for multinational companies depending on whether their foreign subsidiaries used a fiscal or calendar year.
The Treasury issued the Treasury Regulation Section 1.951A-2(c)(5) to eliminate that difference by limiting certain deductions during the transition period. Under the regulation, deductions, or losses attributable to non-taxable gap-period transactions, are not considered “properly allocable” to GILTI income and thus cannot reduce income subject to U.S. tax.
Keysight alleged that Treasury Regulation Section 1.951A-2(c)(5) unlawfully caused the IRS to deny its refund claims for the 2020-2022 tax years by disallowing amortization deductions that it claimed were authorized under Internal Revenue Code Section 951A. Keysight argued that Treasury Regulation Section 1.951A-2(c)(5) conflicted with Section 951A, exceeded the Treasury’s rulemaking authority, and violated the Administrative Procedure Act because the final rule was not a logical outgrowth of the proposed rule. The government responded that the Treasury acted within its broad rulemaking authority to prevent taxpayers from receiving an unintended tax benefit created by Congress, and that it reasonably implemented the GILTI provisions by limiting deductions attributable to non-taxable gap-period transactions.
Judge David Tapp of the U.S. Court of Federal Claims sided with Keysight. First, relying on the U.S. Supreme Court’s decision in Loper Bright, the court independently interpreted the relevant statutes and held that the Treasury lacked authority to issue Treasury Regulation Section 1.951A-2(c)(5). The court concluded that neither the Treasury’s general rulemaking authority under Internal Revenue Code Section 7805(a) nor Internal Revenue Code Section 951A authorized the agency to eliminate the distinction Congress created between fiscal-year and calendar-year filers. The court rejected the Treasury’s claim that it could broadly fill statutory gaps, explaining such a reading would undermine Loper Bright by allowing agencies to rewrite statutes through regulation. The court also concluded that Congress granted the Treasury rulemaking authority only in specific portions of Section 951A, not in the provision at issue, and that the Treasury could not rely on policy concerns or legislative history to rewrite the tax consequences Congress enacted.
Next, the court ruled the Treasury Regulation Section 1.951A-2(c)(5) conflicted with the Internal Revenue Code. Applying Loper Bright and Skidmore, the court independently interpreted the statute and gave little weight to the Treasury’s interpretation. The court explained that, under Skidmore, courts may consider an agency’s interpretation for guidance, but give it weight only when it is thorough, reasonable, consistent, and persuasive. Evaluating the Treasury’s interpretation of “properly allocable” under that standard, the court found that the Treasury improperly treated the phrase as authority to redefine statutory deductions, even though Congress never delegated that power. Instead, the court concluded the statutory text and related provisions supported Keysight’s interpretation that deductions should be allocated based on their factual relationship to the relevant income. Because the Treasury’s interpretation lacked persuasive reasoning and conflicted with the statute, the court held that Treasury Regulation Section 1.951A-2(c)(5) was invalid.
Bottom Line: The court emphasized that to allow the Secretary of the Treasury to define terms it deems ambiguous, untethered to congressional grants of authority or the underlying statutory context, is precisely the kind of agency overreach Loper Bright was designed to foreclose.
Document: Opinion
