The US government has dropped a key statute of limitations defense in its legal battle against McKesson Corporation (MCK) over contested cost-sharing regulations.
The move clears the way for a full merits hearing on McKesson’s challenge to Treasury regulations governing stock-based compensation under Internal Revenue Code section 482.
McKesson had filed a motion for summary judgment arguing that the US Department of the Treasury’s cost-sharing regulations exceeded its delegated authority and violated the Administrative Procedure Act on procedural grounds.
The government filed its opposing brief on June 5, 2026, contending that the regulations fall “well within the bounds” of the statute.
Authorities argued the rules are necessary to ensure arm’s-length results in cost-sharing arrangements between related parties, defending the Treasury’s broad regulatory reach under IRC section 482.
The government further argued that the statute grants the Treasury authority to allocate income and deductions to clearly reflect income and prevent tax avoidance, without requiring exclusive reliance on comparable uncontrolled transactions.
Responding to McKesson’s reliance on the Supreme Court’s 2024 Loper Bright decision, the government argued that ruling does not undermine the regulations and, if anything, reinforces Congress’s ability to delegate discretionary authority to agencies.
The government also cited the US Tax Court’s 2025 decision in Facebook v. Commissioner and the Ninth Circuit’s 2019 ruling in Altera to support its position on defining arm’s-length outcomes where no comparable third-party transactions exist.
Notably, the government chose to abandon the affirmative defense it had raised based on the six-year statute of limitations for civil actions against the United States under 28 U.S.C. section 2401(a).
While the government did not concede that McKesson’s procedural challenge was timely, it explicitly declined to advance the six-year limitations argument going forward.
The practical effect of this decision is that McKesson’s regulatory challenge will proceed without a threshold timeliness barrier standing in the way of the substantive dispute.
Legal analysts suggest the government’s decision may reflect a strategic calculation to avoid establishing unfavorable precedent on whether the six-year statute of limitations ever applies in a tax refund action.
The case, analysed by Kai M. Fenty and Edward L. Froelich of McDermott Will and Schulte LLP, continues to attract significant attention from tax and regulatory practitioners across the United States.