The US Tax Court has handed a significant win to corporate taxpayers, ruling that a Treasury regulation limiting the dividends-received deduction under Section 245A cannot stand because it conflicts with the plain language of the statute Congress wrote.
The case centered on Siemens Medical Solutions USA Inc., which received a dividend of roughly $671 million in March 2019 from a Dutch subsidiary, following two related-party asset sales the year before. The IRS argued that those sales counted as "extraordinary dispositions" under a temporary regulation (Treasury Regulation § 1.245A-5T), which would have cut Siemens' deduction in half, reducing it by $315 million and creating a tax deficiency of more than $7 million across 2019 and 2021.
Section 245A, enacted as part of the 2017 Tax Cuts and Jobs Act, allows domestic corporations a full 100% deduction on qualifying foreign-source dividends. The Treasury regulation at issue attempted to carve out an exception for dividends tied to certain cross-border asset transfers, but the court found that this carve-out had no grounding in the statute itself.
Writing for the court, Judge Kathleen Kerrigan explained that the regulation was originally meant only to smooth over timing mismatches between three related TCJA provisions, not to impose a substantive new limitation. Leaning on the Supreme Court's 2024 decision in *Loper Bright Enterprises v. Raimondo* along with the Tax Court's own recent ruling in *Varian Medical Systems Inc. v. Commissioner*, Kerrigan concluded that Treasury had exceeded its rulemaking authority. As she put it, when a regulation and a statute directly conflict, the statute wins.
The court granted Siemens' motion for summary judgment, invalidating the Extraordinary Disposition Rules as a matter of law. Judge Rose E. Jenkins did not participate in the opinion.
**Why it matters:** This ruling continues a post-*Loper Bright* trend of courts scrutinizing Treasury regulations that go beyond the text Congress actually enacted. For multinational companies with cross-border dividend structures, the decision could open the door to challenging similar limitations built into other TCJA-era regulations, and it signals that agencies will face a tougher time defending rules that rely on policy rationale rather than statutory footing.
*Case: Siemens Med. Sols. USA Inc. v. Commissioner, T.C., No. 11432-25 (July 15, 2026).*