James Matheson (Bloomberg): Varian Owes $7 Million After Tax Court Sunk Dividend Deductions:

Global medical manufacturer Varian Medical Systems Inc. is liable for a $7.3 million tax deficiency after a prior US Tax Court opinion disallowed some of the dividend deductions the company claimed for its 2018 tax year, according to a stipulated decision entered in the court.

Judge Emin Toro on Monday said the parties’ computation aligned with his April opinion, which held Varian didn’t directly hold shares of some controlled foreign corporations for which the deductions were claimed, and were thus ineligible for IRC Section 245A deductions for them. Section 245A was enacted in 2017 by a Republican tax and economic policy bill and provides a deduction for certain dividends US corporations receive from foreign subsidiaries.

 Varian can’t claim deductions for its lower tier controlled foreign corporations under IRC Section 245A because the shares were held by intermediate foreign corporations, and thus, the holding period to claim said deductions wasn’t fulfilled under IRC Section 246(c), the April opinion said.

Separately, Varian is challenging a $1.2 billion tax deficiency assessed by the IRS for allegedly failing to properly analyze profits from Swiss and Dutch entity sales under the tax code in 2021.

 The parties agreed the decision doesn’t take the direct or indirect effects of any losses in the 2021 taxable year into consideration for 2018, and the IRS agreed to waive any res judicata defense on those years that could result from the decision.