Insights

In a significant decision for generic drug manufacturers, the Federal Circuit recently affirmed that litigation expenses incurred in defending Hatch-Waxman patent lawsuits are deductible as ordinary and necessary business expenses under the Internal Revenue Code (IRC). The ruling in Actavis Laboratories FL, Inc. v. United States, No. 23-1320 (Fed. Cir. Mar. 21, 2025), resolves a key tax dispute, allowing tax deductions for these expenses in the year they are incurred rather than capitalizing them over time. This outcome provides clarity and potential tax benefits for qualifying businesses navigating the interplay of patent litigation and FDA drug approvals.

On February 18, President Trump issued an Executive Order titled “Ensuring Accountability for All Agencies” that directs independent agencies (as well as Cabinet Departments and their sub-agencies) to route all “proposed and final significant regulatory” and budgetary actions through the White House and the Office of Management and Budget. If implemented to its full extent, this action will significantly strengthen the authority of the White House by weakening the political autonomy of these independent agencies. As an assertion of the President’s inherent powers under Article II of the U.S. Constitution, it also stands to weaken congressional influence over these independent agencies, both through the appropriations and confirmation processes.

Companies with employees in the Southern California area have several tax-advantageous alternatives when providing employees with disaster relief.  This alert outlines the more common relief programs available under IRS guidance.

Since its passage in 2022, the Inflation Reduction Act’s renewable energy tax credits have been in the crosshairs of Congressional Republicans. With many of the Tax Cuts and Jobs Act provisions expiring at the end of 2025, and a full plate of Trump and Congressional Republican Campaign promises for tax cuts in play, the Republicans have pointed to repeal of the IRA as a source of funding to pay for other tax breaks.

On October 24, 2024, Crowell & Moring LLP hosted its 38th Annual Managing Tax Audits and Appeals Seminar. The seminar featured several prominent IRS speakers and lively discussion among clients, including conversations about the following hot topics:

With a new President entering office in January 2025 and many key Tax Cuts and Jobs Act provisions expiring (TCJA) on December 31, 2025, both sides of the aisle are teeing up a massive effort to renew, extend, roll back, or make permanent various provisions of former President Trump’s signature tax bill and President Biden’s signature climate bill. Just about every business sector will be impacted by how Congress and the new administration approach TCJA and other tax issues. Here is a sneak peek into the top five issues our tax and policy experts expect to come up in that debate based on the campaign positions of Vice President Harris and former President Trump.

On Friday, June 28, 2024, the U.S. Supreme Court overruled Chevron U.S.A. v. Natural Resources Defense Council (“Chevron”)[1] in Loper Bright Enterprises v. Raimondo (No. 22-451) and Relentless v. Dep’t of Commerce (No. 22–1219)[2] (the two cases collectively referred to as “Loper Bright”), bringing an official end to the decades-old and eponymously named “Chevron deference” doctrine. Not content to stop there, the Court returned fresh to work Monday, July 1, to, in Corner Post, Inc. v. Board of Governors of the Federal Reserve System (No. 22-451)[3] (“Corner Post”), effectively extend the limitations period to challenge final agency actions under the Administrative Procedure Act (“APA”).

On April 25, 2024, the Department of Labor (“DOL”) published a final rule (the “Final Rule”) regarding when providing investment advice results in the advisor becoming a fiduciary under the Employee Retirement Income Security Act of 1974, as amended (“ERISA”) and the Internal Revenue Code of 1986, as amended (the “Code”).  Under this guidance, an entity is a fiduciary if the provider of that advice to an ERISA plan or Individual Retirement Account:

The Treasury and IRS published their final rules on transferability for clean energy tax credits on April 30, 2024. The final rules include very few changes from the proposed regulations and rejected many of the suggestions offered by commenters during the public hearing.

Tax partner Carina Federico and Tax counsel Eleanor Moran McWaters discuss IRA and Tax Exempt Entities.

Key Takeaways:

Tax partner and co-chair Starling Marshall and tax partner Carina Federico discuss where they predict tax disputes may arise with the IRS related to the IRA clean energy provisions. 

Last week, the IRS announced plans to begin a campaign to audit personal use of business aircraft. The audits will focus on whether large corporations, partnerships and high-and ultra-high net worth aircraft owners have properly reported their business and personal aircraft usage for tax purposes, with a particular focus on ensuring that owners are only taking deductions to which they are entitled. Given the value of an aircraft, the amount of a deduction for aircraft related expenditures on a given taxpayer’s return can be in the tens of millions of dollars, and with more than 10,000 corporate jets operating in the U.S., IRS Commissioner Daniel Werfel recognized that much is at stake with this campaign.  The audit campaign is expected to focus initially on multinational and domestic corporations and complex partnerships but is expected to expand from there.

Tax partner and co-chair Christine Lane and tax partner Carina Federico discuss recent developments with the Inflation Reduction Act.

On December 19, 2023, the bilateral income tax treaty between the United States and Chile (formally, the Convention between the Government of the United States of America and the Government of the Republic of Chile for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital, and hereafter referred to as, the “Treaty”) entered into force more than a decade after it was signed.

This week, IRS Commissioner Daniel Werfel informed a crowd at a conference that the IRS was looking to reset its approach to ERC claims after implementing a moratorium on processing claims in September. Mr. Werfel communicated that the IRS is focused on changing the way it processes these claims and on communicating the eligibility criteria to taxpayers. He also indicated a willingness to work with employers who received the credit, but were not actually entitled to it, allowing taxpayers to pay back the funds to the IRS in a way that works for their businesses.

This week, the IRS announced a new withdrawal process to allow certain employers who filed an Employee Retention Credit (ERC) claim, but have not yet received a refund, to withdraw their submission. As discussed in our previous alert, the IRS recently announced a pause in processing new ERC claims, at least through the end of 2023, due to concerns that many recently filed claims are invalid.

The IRS recently announced that it will stop processing any new claims for the Employee Retention Credit (ERC) through at least the end of the year due to concerns that a large number of recent claims are invalid. The ERC, enacted as part of the CARES Act in 2020, provides a refundable tax credit for eligible employers impacted by the pandemic from March 13, 2020 through September 30, 2021.

On August 30, the U.S. Department of the Treasury (“Treasury”) published in the Federal Register proposed regulations addressing the prevailing wage and apprenticeship (“PWA”) requirements under Sections 45(b)(7) and (8) of the Inflation Reduction Act (“IRA”).  These proposed regulations incorporate and supplement the limited guidance issued previously, which includes Notice 2022-61, published by the Treasury in November 2022, as well as the Frequently Asked Questions (“FAQ”) on the Department of Labor’s IRA website.  The proposed regulations shed light on various issues of significance to taxpayers seeking the enhanced tax credits provided by the IRA, as well as other stakeholders. 

The IRS has delayed the implementation of § 603 of the SECURE 2.0 Act (“Act”), which requires certain highly paid plan participants to make Roth (rather than pre-tax) catch-up contributions beginning in 2024.  In short, the IRS has provided an “administrative transition period” during 2024 and 2025 whereby individuals who made more than $145,000 in FICA wages during the prior year can continue to make pre-tax catch-up contributions.  This is great news for employers and those taxpayers who would have been forced into Roth catch-up contributions.