Unresolved Conflicts Between the U.S. Commensurate with Income Standards and the Arm’s Length Comparability Analysis

By denying the petition for certiorari for Altera Corporation (Altera U.S.), the UnitedStates Supreme Court has permitted the position of the U.S. Court of Appeals for theNinth Circuit to prevail. The position maintains the validity of the U.S. cost-sharing rulesthat necessitates participants to a qualified cost-sharing arrangement (QCSA) to includestock-based compensation (SBC) in the cost base. While the denial ends the duel betweenAltera and the Ninth Circuit, the larger conflict between the Commensurate with Incomestandards (CWI) and the arm’s length comparability analysis requirement for cost-contri-bution arrangements (CCA) remains open. This article identifies linkages between the nar-row problem of SBCs under CSAs that concern Altera and the broader direction of thearm’s length standard for CCAs.