What Does Whirlpool’s Transfer Pricing Verdict Mean for Manufacturers?March 3, 2022
Whirlpool’s Tax Battle with the IRS
The IRS is taking a hit in the press these days for a record-setting backlog of tax returns—and from the looks of things, Whirlpool Financial Corporation seems to have no problem jumping on the not-so-flattering media bandwagon.
The company lost a transfer pricing case against the IRS in May 2020—and now owes the government back taxes on $45 million—a ruling that was echoed at the Sixth Circuit Court in December 2021.
But instead of just licking its wounds—and pulling out the old checkbook—the company requested the Sixth Circuit rehear the case, a move that the IRS immediately opposed.
Is Whirlpool ready to go home quietly now? Not exactly. According to Law360, last week, attorneys for the company said the IRS was “dismissive” in asking the court to deny the case, which centers around whether income earned from Luxembourg and Mexican related-parties should be considered foreign base company sales income (FBCSI), and therefore taxable in the U.S.
The IRS had accused the appliance manufacturer of tax avoidance, but Whirlpool said its arrangement was subject to legitimate tax breaks under Mexico’s maquiladora structure, and the government has “bizarrely brushed off those claims.”
Other companies have expressed support for Whirlpool in a brief petitioning the Sixth Circuit to rehear the case, and it’s no wonder why—if this decision has implications for Whirlpool’s manufacturers, then it has implications for manufacturers of multinational companies everywhere.