In a judgment published on August 30 2005, the Tax Court found that Xilinx’s cost sharing agreement did not, as the IRS had argued, include any sharing of cost for stock option expenses and met the arm’s-length standard of the IRS Tax Regulations.

This issue was tried in July 2004 for the Company’s fiscal years 1996 through 1999. The Tax Court concluded that the Company was not liable for any tax, penalties or interest associated with the IRS assertions.

On August 25, the IRS filed a Notice of Appeal against the decision with the United States Court of Appeal for the Ninth Circuit.

In a filing with the US Securities and Exchange Commission (SEC), Xilinx announced that it intends to oppose the appeal because it believes that "the Tax Court decided the case correctly."

Xilinx is one of a number of US technology companies being pursued by the IRS for outstanding taxes related to transfer pricing arrangements with Irish subsidiaries.

Last month Cadence Design Systems, a designer of software and hardware tools for the semi-conductor industry, filed a notice with the SEC revealing that it has been locked in a dispute with the IRS since 2003 concerning an alleged US$143 million in unpaid tax relating to the three tax years between 1997 and 1999.

Other companies fighting similar cases include Synopsis, another leading semiconductor design software firm, and Symantec, the maker of Norton, the popular anti-virus software.

Symantec recently settled a $100 million transfer-pricing tax claim relating to the 2003 and 2004 tax years by agreeing to pay the IRS $36 million, but is also fighting a separate IRS claim totalling $900 million.