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Biotech Company Contests the IRS’ Transfer Pricing Assessment

10th May 2022

TP in 5 social image with biotech photo

If you still question the importance of a functional analysisthat local file depiction of which entity contributes most in terms of functions, assets, and risks—take a look at biotech multinational, Amgen. The California-based drugmaker is engaged in a transfer pricing dispute with the IRS, which could result in a $7.1 billion tax bill, including interest and penalties. What’s the issue? The IRS doesn’t agree with the profit allocation between the U.S. company and its largest manufacturing facility in Puerto Rico for tax years 2013-2015. The chief financial officer told analysts during a second-quarter earnings call that there was a difference of opinion in terms of how much risk and complexity is assumed at the manufacturing site in Puerto Rico. This year, the company has assured investors that its profit allocation recognizes the contributions of each entity, and that the company will “vigorously contest” the IRS, which it claims is without merit. So, if you wonder if tax authorities are paying attention to taxpayers’ functional analyses, guess what? They are. So, make sure yours is robust and convincing. After all, as Amgen might tell you, it can save you a bundle.