McKesson Corp. v. United. States Archives

Government drops statute of limitations defense in McKesson cost-sharing challenge

We previously reported on McKesson Corporation’s motion for summary judgment on the grounds that the US Department of the Treasury’s stock-based compensation cost-sharing regulations under Internal Revenue Code (IRC) § 482 were invalid as exceeding its delegated authority and invalid based on procedural violations of the Administrative Procedure Act. On June 5, 2026, the government filed its opposing brief, arguing that the regulations fall “well within the bounds” of the statute and are necessary to ensure arm’s-length results in cost-sharing arrangements between related parties.

Defending the Treasury’s regulatory authority

The government contended that IRC § 482 does not require the Internal Revenue Service to rely exclusively on comparable uncontrolled transactions. It argued that the statute grants the Treasury broad authority to allocate income and deductions to clearly reflect income and prevent tax avoidance. Responding to McKesson’s reliance on the Supreme Court of the United States’ 2024 Loper Bright decision, the government argued that the ruling does not undermine the regulations and, if anything, reinforces Congress’s ability to delegate discretionary authority to agencies.

The government also cited to the US Tax Court’s 2025 decision in Facebook v. Commissioner and the US Court of Appeals for the Ninth Circuit’s 2019 ruling in Altera. It argued that these cases support the proposition that the Treasury may define arm’s-length outcomes where no comparable third-party transactions exist and that including stock-based compensation in cost-sharing arrangements is consistent with IRC § 482’s statutory objectives.

Six-year statute of limitations defense no more

Notably, the government chose to drop the affirmative defense it raised in its answer based on the six-year statute of limitations for civil actions against the United States. Under 28 U.S.C. § 2401(a), such suits must be filed within six years of when the right of action first accrues. While the government did not concede that McKesson’s procedural challenge was timely, it explicitly declined to advance the six-year limitations argument. The practical effect is that the merits of McKesson’s regulatory challenge will proceed without a threshold timeliness barrier. The government’s decision may reflect a strategic decision to avoid unfavorable precedent on whether the six-year statute ever applies in a tax refund action.

IRS roundup: May 7 – May 18, 2026

Check out our summary of significant Internal Revenue Service (IRS) guidance and relevant tax matters for May 7, 2026 – May 18, 2026.

May 13, 2026: The IRS announced a time-limited settlement initiative for eligible conservation easement and historic preservation easement cases, offering taxpayers an opportunity to resolve disputes on terms the agency described as more favorable than recent US Tax Court outcomes. Under the initiative, taxpayers generally must concede the charitable contribution deduction but may receive an “other deduction” approximating out-of-pocket costs, with reduced gross valuation misstatement penalties of 10% (or 20% after 90 days) instead of the 40% penalties frequently sustained in litigation.

The IRS stated that recent Tax Court decisions have, on average, allowed only about 6% of claimed deductions while often sustaining 40% penalties and emphasized that the initiative is intended to resolve a substantial backlog of easement cases. The settlement program applies only to eligible cases and includes special procedures for both Tax Equity and Fiscal Responsibility Act of 1982 and Bipartisan Budget Act of 2015 partnership proceedings.

May 15, 2026: The IRS issued Notice 2026-31, providing updated corporate bond yield curves, segment rates, and Treasury rates used for pension funding and minimum present value calculations under §§ 417, 430, and 431. The notice sets the April 2026 spot segment rates at 4.27%, 5.34%, and 6.22% and provides adjusted 24-month average segment rates applicable for May 2026 plan years.

The notice also provides the 30-year Treasury rate for April 2026 (4.91%) and the weighted average Treasury rate used for multiemployer plan funding calculations, along with the full monthly corporate bond yield curve derived from April 2026 data.

The IRS also released its weekly list of written determinations (e.g., Private Letter Rulings, Technical Advice Memorandums, and Chief Counsel Advice).

Recent Tax Court decisions

May 7, 2026: In Sanders Creek Owner, LLC v. Commissioner, pursuant to a stipulated Tax Court decision, the IRS disallowed a $43.8 million charitable contribution deduction claimed in connection with a conservation easement transaction that resulted in an imputed underpayment of approximately $16.2 million. The Court also sustained a 10% gross valuation misstatement penalty under § 6662(h) while declining to impose other asserted accuracy-related penalties.

May 12, 2025: In Stokey v. Commissioner, T.C. Memo. 2025-44, the Tax Court dismissed a taxpayer’s deficiency petition as untimely, holding that the taxpayer failed to establish entitlement to equitable tolling under the US Court of Appeals for the Third Circuit’s decision in Culp v. Commissioner. Although the taxpayer asserted that he did not receive the notice of deficiency until after the filing deadline because he had moved, the Court found that the IRS properly mailed the notice to the taxpayer’s last known address and that the taxpayer failed to demonstrate either diligent pursuit of his rights or extraordinary circumstances preventing timely filing.

The Court emphasized that equitable tolling applies sparingly and requires taxpayers to show both diligence and circumstances beyond their control. Even [...]

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Government drops statute of limitations defense in McKesson cost-sharing challenge

IRS roundup: May 7 – May 18, 2026

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