The United States Tax Court ruled on September 2, 2026, in a case involving Airbnb, Inc. and the Internal Revenue Service (IRS). The court addressed motions related to expert witness declarations in a tax dispute that could affect how Airbnb handles its income reporting. This ruling is significant as it clarifies the rules surrounding expert testimony in tax cases.
Airbnb, a corporation based in San Francisco, California, provides an online marketplace for travel accommodations. The company is currently involved in a tax dispute with the IRS regarding an income increase of over $4.1 billion related to its operations with an Irish affiliate. The court's decision impacts how the parties can gather evidence and present their cases as they move forward.
The dispute began when Airbnb challenged the IRS's determination to increase its income by $4,195,858,428 based on resources and rights made available to its Irish affiliate. As part of the pretrial process, both Airbnb and the IRS filed competing motions for a discovery protective order, which led to the court's ruling on the admissibility of expert declarations submitted by the IRS.
The IRS submitted two declarations from Monty G. Myers, an expert in software development, to support its motion. Airbnb sought to strike these declarations, arguing they did not meet the requirements for expert reports under Tax Court rules. Airbnb claimed the declarations provided legal opinions and advocacy that were inappropriate for the case.
In its ruling, the court stated, "The requirements of Tax Ct. R. Prac. & Proc. 143(g) do not apply to declarations submitted in support of a pretrial discovery motion." The court, led by Judge Toro, denied Airbnb's motions to strike the expert declarations, concluding that they were relevant to the discovery process.
The court emphasized that the declarations were not subject to the same standards as expert testimony presented during a trial. It clarified that the focus of the declarations was on pretrial procedural matters, not the substantive issues of the case. The court noted, "We will disregard the Declarations to the extent they offer legal opinions," indicating that while the declarations could remain, the court would not consider any legal conclusions drawn in them.
This ruling is important for both parties as they prepare for the next steps in the case. It allows the IRS to use expert testimony in its arguments while limiting the scope of what can be considered during the trial. The decision sets a precedent for how expert declarations are handled in tax cases, particularly regarding discovery motions.
Moving forward, the ruling means that both Airbnb and the IRS can continue to gather evidence and prepare their cases with the understanding that expert declarations can be part of the discovery process. This decision may influence how similar cases are approached in the future, especially in terms of expert witness involvement.
The case is not over yet, as both parties will likely continue to engage in discovery and prepare for trial. There is the possibility of an appeal, but details were not available in the court filing regarding whether either party intends to pursue that route.
As the case progresses, it will be closely watched by those in the business and tax communities, as it could have implications for how large corporations like Airbnb navigate tax regulations and disputes with the IRS.