The United States Court of Federal Claims ruled on 2 July 2026 that the Treasury lacked authority to issue a regulation limiting deductions in the computation of global intangible low-taxed income. The decision in *Keysight Technologies, Inc. & Subsidiaries v. United States*, No. 25-137 grants the taxpayer partial summary judgment and invalidates Treas. Reg. § 1.951A-2(c)(5).
What the regulation did
Regulation 1.951A-2(c)(5) restricts deductions attributable to so-called 'disqualified basis' when computing a controlled foreign corporation's tested income or tested loss under Section 951A of the Internal Revenue Code. The effect is to reduce the deductions available against gross tested income, thereby increasing a US shareholder's GILTI inclusion.
The court's reasoning
The court applied the post-*Loper Bright* analytical framework, under which courts no longer defer to an agency's interpretation of an ambiguous statute. Without Chevron deference available, the court assessed whether Treasury's reading of the phrase 'properly allocable' in Section 951A carried independent persuasive force under *Skidmore v. Swift & Co.* It did not. The court found Treasury's interpretation unpersuasive and held the regulation exceeded the authority conferred by Section 7805(a), the general grant of regulatory power to the Treasury.
The decision is notable as one of the first rulings to examine Treasury's regulatory authority under Section 7805(a) in a post-*Chevron* environment. That question is likely to recur across a range of international tax regulations promulgated in recent years.
Practical implications
This is a trial-level refund decision. It is not binding on other courts, and an appeal to the United States Court of Appeals for the Federal Circuit remains possible. Taxpayers should not treat the ruling as settled law.
That said, the decision is directly relevant to any US shareholder with open GILTI years or a pending refund claim where disqualified basis deductions were restricted under the invalidated regulation. Affected taxpayers should review the documentation supporting their deductions and gross tested income calculations, and monitor appellate developments closely before drawing broader conclusions.