Federal Court Invalidates IRS GILTI Rule, Aiding Keysight’s Refund Case and Impacting Abbott Labs

Keysight Technologies won partial summary judgment July 2 after the U.S. Court of Federal Claims invalidated a Treasury regulation that the company said unlawfully denied amortization deductions under the Global Intangible Low-Taxed Income regime. The decision also gives Abbott Laboratories a potential argument against an $8 million GILTI allocation the IRS made for tax year 2020.

Judge David A. Tapp ruled that Treasury lacked statutory authority to issue Treasury Regulation § 1.951A-2(c)(5), known as the GILTI “disqualified basis rule.” The case is Keysight Technologies, Inc. & Subsidiaries v. United States, No. 25-137 (Fed. Cl. July 2, 2026).

The court rejected the government’s reliance on Internal Revenue Code § 7805(a), the general rulemaking provision, as sufficient authority for the substantive regulation. The ruling came after the Supreme Court’s 2024 decision in Loper Bright Enterprises v. Raimondo, 603 U.S. 369 (2024), which ended the former Chevron deference framework.

The ruling does not automatically resolve Abbott’s dispute. Its effect may depend on the case’s procedural posture, the court hearing it, and any appeal or conflicting authority.

The court rejected Treasury’s fix for a statutory mismatch

The dispute arose from the Tax Cuts and Jobs Act of 2017, which created GILTI taxation on certain foreign earnings. Different fiscal year-end dates for controlled foreign corporations created a transition-period gap before the new regime took effect.

During that period, some multinational companies could transfer assets and establish a stepped-up tax basis. Treasury issued the 2019 regulation to prevent those transactions from producing amortization deductions that reduced GILTI income.

Judge Tapp described the regulation as the “Treasury’s self-inflicted fix of a mismatch” that Congress had built into the statute. He also called the regulation “antithetical to the very core” of the Loper Bright precedent.

The opinion instead required the court to interpret the statute independently. Treasury’s general authority to administer the tax laws did not, in the court’s view, permit the agency to redefine which deductions were “properly allocable” to GILTI.

That approach places the operative text of IRC § 951A at the center of the dispute. The government defended the regulation by arguing that IRC § 7805(a) authorized the rulemaking.

Abbott can point to the same 2019 regulation

Abbott said the IRS used the invalidated regulation to allocate $8 million to the company in 2020. The company therefore may argue that the Keysight ruling weakens the government’s position in its own case.

A representative for Abbott also described the company’s parallel GILTI-related challenge as involving $3 billion. The dispute is identified as Abbott Laboratories v. Commissioner, T.C. No. 20193-24.

The company’s position is direct:

“confirms the illegality of Treasury's attempt to override clear statutory text through regulation.”

The statement came from an Abbott representative after the ruling. It does not establish that Abbott has already won its case or that the Tax Court must adopt the Court of Federal Claims’ reasoning.

The two matters also involve different proceedings. The Keysight case was brought in the U.S. Court of Federal Claims, while Abbott’s case is identified as a Tax Court matter.

Keysight is seeking a refund for three tax years

Keysight is seeking a tax refund of nearly $108 million, or $107.8 million, for tax years 2020, 2021, and 2022. The company challenged the regulation after Treasury used it to deny deductions tied to the stepped-up basis created during the transition into GILTI.

Jenny A. Austin, the lead partner representing Keysight, called the result a “significant win for taxpayers.” She said the judgment reasserted the judiciary’s role in interpreting the Tax Code independently of agency overreach.

The court granted partial summary judgment. The ruling therefore resolves the statutory-authority question addressed in the decision, while the case’s remaining issues may continue through the litigation process.

The government’s defense relied on the IRS’s general rulemaking power under IRC § 7805(a). That argument failed to sustain this regulation after the court applied Loper Bright’s independent statutory analysis.

Other companies may examine similar GILTI adjustments

The ruling could affect multinational companies with foreign subsidiaries whose fiscal years did not align with the calendar year when GILTI began. Abbott, Pfizer, and Agilent Technologies were identified as companies with potential exposure to similar fiscal-year issues.

The decision may also provide a framework for challenging other Treasury regulations issued under the TCJA. The strongest cases would involve rules grounded primarily in general administrative authority rather than an explicit delegation in the relevant Code provision.

Taxpayers considering similar claims would need to examine the adjustment, the tax year, the forum, and the status of any refund or litigation proceeding. A ruling from the Court of Federal Claims may provide persuasive reasoning without automatically controlling every other tax case.

The reach of the decision could change if the government appeals or if another court reaches a different conclusion. The ruling’s immediate importance lies in its treatment of Treasury Regulation § 1.951A-2(c)(5), not in an automatic refund for every company affected by the regulation.

Treasury Secretary Scott Bessent and Jim Gadwood, who was nominated as IRS Chief Counsel on June 23, 2026, had not issued a formal joint response in the material reviewed. The Department of Justice defended the regulation during the case.

Abbott’s challenge now has a newly issued judicial opinion addressing the same regulatory provision. Its next steps will turn on the separate Tax Court proceeding and the arguments made there.

This article is for informational purposes only and does not constitute tax advice. Consult a qualified tax professional or CPA about your specific situation.