By denying cert to a case involving the IRS, the Supreme Court will cost tech companies billions of dollars.

This is all about foreign subsidiaries: Major technology companies with foreign subsidiaries like to move their costs of doing business to the United States and away from other countries. The result is higher deductions and less taxed income in the U.S., coupled with more income reported in foreign countries, where tax rates are lower.

The appeals court had earlier ruled in favor of the IRS: But the trial court had sided with the plaintiff, Atria, which was later bought by Intel. So tech companies had hoped for a reversal, and some had been waiting to pay the IRS thinking they’d have a smaller bill.

We’re talking big companies and big bucks: Facebook, Alphabet, Twitter and Intel, a party in the suit, are among those that stand to lose billions of dollars combined because of the result. 

The Verdict

This is likely to be a one-time gut punch for the companies. In fact, it’s the IRS that will likely need to make longer term adjustments. Legal experts believe this case will make the agency more open to review by courts in the future.