The IRS announced today (IR-2006-142) that it has resolved the largest tax dispute in American history: a transfer pricing dispute with Glaxo SmithKline Holdings (Americas) Inc. & Subsidiaries (“GSK”):
Under the settlement agreement, GSK will pay the IRS $3.4 billion, and will abandon its claim seeking a refund of $1.8 billion in overpaid income taxes, as part of an agreement to resolve the parties’ long-running transfer pricing dispute for the tax years 1989 through 2005….
The Tax Court dispute for years 1989-2000 involves intercompany transactions between GSK and certain of its foreign affiliates relating to various GSK "heritage" pharmaceutical products. Specifically at issue is the level of U.S. profits reported by GSK after making intercompany payments that took into account product intangibles developed by and trademarks owned by its U.K. parent, and other activities outside the U.S., and the value of GSK’s marketing and other contributions in the U.S. Under the settlement agreement, GSK has conceded over 60% of the total amount put in issue by the two parties for the years pending in Tax Court….
IRS Chief Counsel Donald Korb praised the extraordinary efforts of the Manhattan-based trial team handling the case in bringing about such an outstanding result for the Government. "I am often asked the question," Mr. Korb said, "whether the Chief Counsel lawyers are being constantly outgunned by the large law firms they face in the big dollar cases in the Tax Court. During my tenure as Chief Counsel it has become quite evident to me that our lawyers can go up against the best firms the private tax bar has to offer in the Tax Court and achieve quite successful results."
See the Glaxo press release. For press reports, see:
