How the Keysight Decision Could Affect the Kwong Appeal

On July 2, 2026, the U.S. Court of Federal Claims decided Keysight Technologies, Inc. v. United States, No. 25-137, holding that the Treasury Department exceeded its statutory authority when it issued a regulation governing the global intangible low-taxed income (GILTI) regime. Days later, on July 10, the deadline passed for taxpayers to file protective refund claims under a different Court of Federal Claims ruling — Kwong v. United States, 179 Fed. Cl. 382 (2025), the COVID-era penalty case the government has appealed to the Federal Circuit.

The two cases involve entirely different tax provisions. But they rest on the same legal foundation — and that shared foundation is why Keysight may strengthen arguments available for taxpayers in Kwong.

What Did the Court Decide in Kwong?

In Kwong, the court held that the 2019 version of IRC § 7508A(d) required an automatic postponement of federal tax deadlines for the entire COVID-19 disaster period — January 20, 2020, through July 10, 2023. Critically, the court refused to defer to the Treas. Reg. § 301.7508A-1(g) (3) (ii), which purported to cap that postponement at one year.

Applying the Supreme Court’s 2024 decision in Loper Bright Enterprises v. Raimondo — which overruled Chevron deference — the court read the statute on its own terms and concluded the regulation misread it. The government’s appeal asks the Federal Circuit to reinstate the one-year cap and, with it, give deference to the Treasury’s interpretive regulation.

What Did the Court Decide in Keysight?

Keysight follows a similar interpretive approach. There, the court held Treas. Reg. § 1.951A-2(c) (5) — a rule the Treasury issued to neutralize a GILTI timing mismatch — is invalid because the Treasury lacked the statutory authority to promulgate it. The opinion frames the stakes in its opening line: “When Chevron fell, so too did the presumption that statutory ambiguity favors the agency.” The court found that neither the Treasury’s general rulemaking power under IRC § 7805(a) nor any specific provision authorized it to redefine which deductions are “properly allocable” to GILTI.

At the core of the dispute were two words: “properly allocable.”

Treasury interpreted the phrase to require taxpayers to treat certain deductions as properly allocable to gross tested income, reducing the amount of income eligible for the benefit. The taxpayer argued that the interpretation extended beyond what the statute authorized.

The Treasury could not, the court agreed, redefine it to bury otherwise-allowable deductions in residual income. The Treasury Department’s reliance on section 7805(a) did not save the rule.

According to the court, allowing the Treasury to read ambiguity into the Tax Code and then resolve it without constraint would hand agencies unfettered discretion — “precisely the kind of agency overreach Loper Bright was designed to foreclose.”

Why Could Keysight Matter to the Kwong Appeal?

Although the cases involve different statutes, several aspects of the courts’ reasoning overlap. Three points are particularly relevant to the Kwong appeal: Consistent post-Loper Bright reasoning. Keysight shows the Court of Federal Claims is not treating Kwong as a one-off. In back-to-back decisions, the trial court independently construed a tax statute and declined to defer to a Treasury regulation that reached beyond it. That consistency undercuts any argument to the Federal Circuit that Kwong was an outlier.

What Are the Limits of the Keysight Decision?

Keysight may support arguments raised in Kwong, but it does not dictate the outcome. Four important caveats deserve equal attention:

What Should Advisors and Taxpayers Watch Next?

For taxpayers who filed a Form 843 refund claim under Kwong, Keysight may be relevant because the same court applied similar post-Loper Bright reasoning to another Treasury regulation shortly after Kwong. That reasoning may be relevant on appeal.

Although final resolution may take time, the decision may signal broader judicial willingness to scrutinize Treasury regulations when taxpayers argue they exceed statutory authority.

Because Keysight is itself a GILTI case, it does more than bolster Kwong on appeal — it could prompt a review for internationally active clients when it comes to GILTI, foreign tax credit and section 245A positions from open pre-2026 years where a Treasury regulation may have stretched past its statutory mandate.

Can Taxpayers Still File Kwong-Related Claims?

Taxpayers seeking to file these and other Kwong-related claims should be mindful of the applicable statutory deadlines.

Some taxpayers may have heard about a July 10, 2026, deadline, which applied to many taxpayers seeking to preserve their ability to pursue certain Kwong-related refund claims. That deadline, however, did not necessarily mean that all taxpayers seeking relief under Kwong could no longer file a claim after July 10.

Depending on when, or if, the applicable penalty or interest was paid, taxpayers may still have time to file a Kwong-related claim, provided the applicable statutory limitations period has not expired.

At the same time, taxpayers should be aware that time may be of the essence. An applicable deadline for a particular taxpayer could be approaching. Therefore, taxpayers who believe they may be entitled to relief should act promptly. Withum’s team of tax professionals can help determine whether a claim remains timely and what action, if any, should be taken.