The Tax Times

Thursday, July 16, 2026

Siemens Medical Solutions Section 245A Win: Tax Court Invalidates Extraordinary Disposition Rules

Multinational corporate groups claiming the section 245A dividends‑received deduction just received significant support from the U.S. Tax Court in Siemens Medical Solutions USA Inc. & Consolidated Subsidiaries v. Commissioner (Dkt. No. 11432‑25; 167 T.C. No. 5 (2026).

In this case, the court held that Siemens was entitled to its full section 245A deduction on qualifying foreign‑source dividends and rejected the IRS’s attempt to deny a substantial portion of that benefit through controversial “extraordinary disposition” rules.

What Was at Stake?

Siemens, a U.S. medical technology company with significant foreign subsidiaries, claimed a large section 245A dividends‑received deduction for foreign dividends received in 2018.

The IRS asserted a deficiency tied to approximately $315 million of foreign‑dividend tax benefit, relying on regulations that recharacterize certain transactions as “extraordinary dispositions” and partially strip DRD eligibility. Siemens challenged both the application and the validity of those rules in the Tax Court.

Section 245A: A Cornerstone of U.S. Territorial Taxation

Section 245A, enacted as part of the Tax Cuts and Jobs Act, provides a 100 percent dividends‑received deduction for qualifying dividends paid by certain foreign subsidiaries to their U.S. corporate parents.

Congress designed section 245A as a cornerstone of the modern quasi‑territorial regime, coordinating the DRD with GILTI, subpart F, and other anti‑deferral rules rather than with expansive, open‑ended regulatory clawbacks.

Tax Court’s Key Holdings

The Tax Court sided with Siemens and reached several critical conclusions:

· Section 245A’s statutory text entitles taxpayers to a 100 percent DRD on qualifying dividends from specified foreign subsidiaries, subject to clearly defined statutory limitations.

· Treasury’s extraordinary disposition and excess‑distribution rules went beyond that statutory framework, effectively rewriting eligibility for the deduction and exceeding the agency’s authority.

· The regulations did not satisfy administrative law requirements, rendering them invalid and unenforceable as a basis to disallow Siemens’ dividends‑received deduction.

This reasoning builds on the court’s earlier decision in VarianMedical Systems, where the Tax Court also rejected aggressive attempts to narrow taxpayers’ section 245A benefits through non‑statutory constraints.

Why Siemens Matters for Multinational Taxpayers

For U.S.‑parented groups with foreign subsidiaries, Siemens confirms that section 245A remains a powerful tool for eliminating U.S. tax on qualifying foreign dividends.

The decision signals that courts will closely scrutinize regulatory efforts that effectively override clear statutory DRD entitlements—particularly where Congress already weighed policy trade‑offs when enacting the TCJA.

In practical terms, corporate tax departments should expect:

· Stronger grounds to challenge proposed adjustments that rely on extraordinary‑disposition concepts to limit section 245A benefits.

· Renewed opportunities to revisit prior‑year concessions where exam teams applied these now‑invalid rules to disallow or reduce DRDs.

· Heightened scrutiny of underlying facts—earnings and profits, basis, restructuring steps—even where regulatory authority is successfully challenged.

Audit Defense and Refund Opportunities

In light of Siemens, taxpayers should consider targeted steps in both controversy and planning:

· Audit defense: Reassess section 245A‑related exam positions that depend on extraordinary‑disposition or excess‑distribution theories. Where proposed adjustments rest largely on regulatory overlays, Siemens may support more assertive defense strategies.

· Refund claims: Evaluate open years in which taxpayers accepted limitations on the section 245A deduction primarily because of these rules. Well‑documented refund claims may now be viable where statute‑of‑limitations periods remain open.

· Documentation and governance: Even with favorable case law, taxpayers should continue to document foreign‑subsidiary transactions, distributions, and restructurings carefully, anticipating close IRS review of the factual underpinnings of large DRDs.

Strategic Takeaways for Corporate Tax Planning

Siemens offers several practical lessons for multinational tax planning:

· Section 245A is a statutory benefit; planning should be anchored in the Code and coordinated with GILTI and subpart F, not solely in temporary or aggressive regulatory interpretations.

· Courts are increasingly skeptical of rules that seek to undo clear legislative choices about DRDs and foreign earnings—taxpayers should incorporate this judicial trend into their risk assessments.

· Nonetheless, planning that relies exclusively on the invalidation of regulations may attract future legislative or regulatory attention; prudent structures anticipate possible changes.

How Marini & Associates PA Can Help

Marini & Associates PA advises U.S. and foreign‑based groups on cross‑border tax planning, audit defense, and controversy involving section 245A, GILTI, subpart F, and related international tax rules.

Our team works with clients to:

· Review existing structures and historic distributions in light of the Siemens decision.

· Evaluate audit exposure and develop defense strategies for ongoing and anticipated examinations.

· Identify potential refund opportunities where section 245A benefits were previously curtailed by now‑invalid regulatory concepts.

If your group has significant foreign‑source dividends or is facing IRS scrutiny of section 245A claims, we can help you assess the impact of Siemens and design a tailored response.

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Marini & Associates, P.A.

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Sources:

1. https://www.currentfederaltaxdevelopments.com/blog/2026/7/15/the-invalidity-of-the-extraordinary-disposition-rules-tax-court-upholds-the-plain-meaning-of-section-245a-in-siemens-v-commissioner

2. https://www.taxnotes.com/research/federal/court-documents/court-petitions-and-briefs/medical-device-company-challenges-validity-temporary-regs/7swy1

3. https://x.com/tax/status/2077500575231430977

4. https://www.law360.com/tax-authority/articles/2451434/varian-case-backs-315m-siemens-deduction-tax-court-told

5. https://news.bloombergtax.com/daily-tax-report/siemens-disputes-315-million-tax-deduction-cut-for-dividends

6. https://www.law360.com/tax-authority/articles/2437946/irs-urges-tax-court-to-cut-315m-from-siemens-deduction

7. https://www.taxnotes.com/research/federal/court-documents/court-petitions-and-briefs/siemens-challenges-deficiencies-penalties-tax-court/7j9hw

8. https://www.courtlistener.com/audio/102598/united-states-v-siemens-medical-solutions-usa-inc/

9. https://dockets.justia.com/docket/circuit-courts/ca2/25-864

10. https://www.nlrb.gov/case/01-CA-271050

11. https://casetext.com/case/united-states-v-siemens-med-sols-us-1

12. https://www.ustaxcourt.gov/find-a-case/

13. https://www.justice.gov/usdoj-media/osg/media/196446/dl?inline

14. https://ustaxcourt.gov/find-a-case/

15. https://www.pacermonitor.com/public/case/55873071/Miller_v_Siemens_Medical_Solutions_USA,_Inc_et_al

16. https://www.currentfederaltaxdevelopments.com/blog/2026/7/15/the-invalidity-of-the-extraordinary-disposition-rules-tax-court-upholds-the-plain-meaning-of-section-245a-in-siemens-v-commissioner

17. https://x.com/tax/status/2077500575231430977

18. https://www.law360.com/tax-authority/articles/2451434/varian-case-backs-315m-siemens-deduction-tax-court-told

19. https://news.bloombergtax.com/daily-tax-report/siemens-disputes-315-million-tax-deduction-cut-for-dividends

20. https://www.taxnotes.com/research/federal/court-documents/court-petitions-and-briefs/medical-device-company-challenges-validity-temporary-regs/7swy1

21. https://www.law360.com/tax-authority/articles/2437946/irs-urges-tax-court-to-cut-315m-from-siemens-deduction

22. https://www.taxnotes.com/research/federal/court-documents/court-petitions-and-briefs/siemens-challenges-deficiencies-penalties-tax-court/7j9hw

Monday, July 13, 2026

Judge Rules Trump-IRS Settlement Was The Result Of Sham Suit & No $1.8 billion “Anti‑Weaponization Fund”

The case is a high‑stakes civil action brought by Donald Trump, his sons, and the Trump Organization against the IRS and Treasury over the unlawful disclosure of their tax return information, which has since turned into a vehicle for probing an unusual “anti‑weaponization” settlement fund and possible fraud on the court.

Parties and procedural posture

The plaintiffs are President Donald J. Trump, Donald Trump Jr., Eric Trump, and The Trump Organization LLC, suing the Internal Revenue Service and the U.S. Department of the Treasury in the Southern District of Florida (Case No. 26‑20609‑CV‑Williams). The nature of suit is listed as “Other Statutory Actions” with a tax‑liability cause under 26 U.S.C. § 7401. The case arises from leaks of Trump‑related tax information by an IRS contractor, who was later prosecuted and sentenced for unauthorized disclosures that revealed Trump paid little or no federal income tax in several years.

Claims and factual background

Trump and his co‑plaintiffs allege that IRS personnel (or contractors) unlawfully disclosed their confidential tax return information, causing massive reputational and economic harm and justifying a damages claim reportedly pegged as high as $10 billion. The suit is framed as seeking redress for “weaponization” of the tax system—i.e., using confidential return data for political or media purposes—rather than challenging the underlying tax liabilities. The backdrop includes the public reporting, based on leaked returns, that Trump paid minimal income tax over years despite substantial earnings from ventures such as “The Apprentice.”

Subject‑matter jurisdiction concerns and amici

Judge Kathleen Williams (Miami Division, S.D. Fla.) sua sponte questioned whether the court has subject‑matter jurisdiction, given that Trump—as sitting president—effectively controls the IRS he is suing, raising the possibility there is no genuine adversarial controversy. To assist with the jurisdictional analysis, the court appointed prominent attorneys—including John Gleeson, David O’Neil, Donald Verrilli Jr., Faith Gay, Philippe Selendy, and Corey Stoughton—as amici curiae, directing them to file a memorandum on jurisdiction by May 21, 2026. Their role is to brief whether Article III requirements, sovereign‑immunity doctrines, and related statutory constraints permit the suit to proceed when the plaintiff is the head of the executive branch controlling the defendant agencies.

The settlement, dismissal, and “anti‑weaponization” fund

On May 18, 2026, Trump and his co‑plaintiffs filed a voluntary dismissal, and the court entered an order dismissing the case with prejudice. That same day, the Department of Justice publicly announced a settlement involving the creation of a roughly $1.8 billion “anti‑weaponization fund” intended to compensate individuals who claim they were targeted or “weaponized” by federal enforcement actions, including alleged politically motivated prosecutions. DOJ also released an addendum purporting to “permanently bar” IRS audits or enforcement actions against Trump, his family, and certain affiliates with respect to prior returns, effectively creating a forward‑looking audit shield. Critics, including bipartisan lawmakers and legal experts, have condemned the fund as a potential “slush fund” lacking clear statutory authorization or congressional appropriation and as a mechanism by which Trump could reward allies and indirectly benefit his own family.

Motions alleging fraud on the court and reopening

A group of 35 former federal judges moved to intervene or otherwise be heard, arguing that the post‑dismissal “settlement” and fund raise serious concerns of collusion and fraud on the court under Federal Rule of Civil Procedure 60. They contend the court was deceived because the plaintiffs’ voluntary dismissal and the government’s public announcement of a settlement were not candidly disclosed or submitted to the court, yet appeared coordinated to insulate the agreement from judicial scrutiny. The former judges assert that Trump leveraged the litigation to obtain unlawful private gains—namely, broad immunity from IRS scrutiny and access to taxpayer‑funded compensation—without congressional approval and while evading court review of the settlement terms.

Responding to these concerns, Judge Williams reopened the case to investigate whether the settlement and the anti‑weaponization fund are the product of collusion and amount to a fraud on the court. She ordered Trump’s counsel to address whether the parties are genuinely adverse, whether the court was a “victim of a fraud,” and how the “forever” non‑audit agreement fits within the permissible scope of executive authority; she also signaled that Justice Department officials, including the acting attorney general, may be required to testify. Separately, another federal court has issued a temporary injunction blocking establishment of the fund and any payouts, adding another layer of legal uncertainty.

Practical implications and issues for tax practitioners

For practitioners, the case spotlights several issues:

· The boundaries of IRS and contractor liability for unauthorized disclosures of return information, and potential damages theories under confidentiality and tax‑administration statutes.

· The limits of executive‑branch settlement authority to grant forward‑looking audit protection or effectively waive future enforcement, especially where such relief resembles legislative action without congressional approval.

· The circumstances under which a civil tax‑related suit can be reopened under Rule 60 on the theory of “fraud on the court,” and how courts assess collusion between nominally adverse public and private parties.

· Broader separation‑of‑powers concerns if a sitting president uses litigation against his own agencies to secure individualized benefits, including immunity from tax audits and access to off‑budget funds.

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