On July 15, 2026, the US Tax Court issued its decision in Siemens Medical Solutions USA, Inc. and Consolidated Subsidiaries v. Commissioner, 167 T.C. No. 5, holding that Siemens was entitled to the full 100% dividends-received deduction under section 245A of the Internal Revenue Code for a 2019 dividend received from its Dutch subsidiary, and invalidating Treasury’s Temporary Treasury Regulation section 1.245A-5T, known as the Extraordinary Disposition Rules. The decision is the third in a recent line of cases (following Keysight Technologies and Varian Medical Systems) in which federal courts have struck down Treasury regulations attempting to close TCJA transition-period gaps not addressed by Congress.
Statutory background. The Tax Cuts and Jobs Act of 2017 introduced three interlocking regimes to transition the United States toward a partially territorial system: section 245A (100% dividends-received deduction for foreign-source dividends from specified 10-percent-owned foreign corporations, effective for distributions after December 31, 2017); section 965 (mandatory repatriation tax on accumulated foreign earnings as of December 31, 2017); and section 951A (GILTI, applicable to CFC taxable years beginning after December 31, 2017, since renamed NCTI under the July 2025 legislation). For fiscal-year taxpayers, these differing effective dates created a narrow window in which certain foreign earnings could escape both section 965 and GILTI while remaining eligible for the section 245A deduction on later distribution. Treasury sought to close this gap through the Extraordinary Disposition Rules, which disallowed 50% of the section 245A deduction on dividends paid out of an extraordinary disposition account.
The court’s holding. Applying the post-Loper Bright framework in which agency regulations no longer receive Chevron deference, the Tax Court found the statutory text of section 245A unambiguous and held that Treasury could not add a new limiting condition that Congress did not enact. The court emphasized that “Treasury, not Congress, was concerned” about the tax-free gap, and that concerns about tax policy cannot override the plain meaning of the statute, even under the rulemaking authority in section 245A(g) or the general authority in section 7805(a). The result is that Siemens is entitled to the full section 245A deduction, and the Extraordinary Disposition Rules are invalid.
Companion decisions. The Siemens decision follows two other recent taxpayer wins. In Keysight Technologies, Inc. and Subsidiaries v. United States (Fed. Cl. July 2, 2026), the Court of Federal Claims invalidated the GILTI disqualified basis rule under Treas. Reg. section 1.951A-2(c)(5), holding that Treasury lacked statutory authority to disallow amortization deductions arising from transition-period related-party transfers. Keysight is seeking a refund of nearly 108 million dollars for tax years 2020 through 2022. In Varian Medical Systems (2024), the Tax Court invalidated Treas. Reg. section 1.78-1, which had targeted a related section 78 and 245A mismatch. Together, the three decisions form a consistent pattern: courts are unwilling to permit Treasury to rewrite clear statutory rules to close policy gaps, even when the resulting outcomes may be inconsistent with the transition regime’s overall design.
Practical implications. For US multinationals and inbound-outbound clients, the takeaways are significant. First, taxpayers with pending or unresolved section 245A, GILTI, or NCTI issues should review return positions, consider protective refund claims where the statute of limitations is a concern, and prepare for likely further government litigation seeking to preserve or reissue the affected regulations. Second, the decisions signal broader vulnerability for Treasury regulations relying primarily on general rulemaking authority under section 7805(a) rather than a specific statutory delegation. Third, planning for fiscal-year CFC structures, dividend distributions from foreign subsidiaries, and cross-border restructurings should account for the fact that the Extraordinary Disposition Rules and the GILTI disqualified basis rule are, at least for now, no longer enforceable as written. Multinational clients in Brazil, Portugal, and the EU with US corporate parents or US shareholders should coordinate with US tax counsel on how these developments affect their group tax positions.
Source: Sullivan and Cromwell; Current Federal Tax Developments; Law360; Holland and Knight