The Tax Management Transfer Pricing Report ™ provides news and analysis on U.S. and international governments’ tax policies regarding intercompany transfer pricing.
By Sony Kassam
Data compiled by Bloomberg BNA through a search of advance pricing agreement disclosures in SEC filings from January 2015 to February 2017 show 29 companies have mentioned the agreements, which resolve potential transfer pricing issues with one or more tax authorities for future years.
Some companies reported changing an existing agreement, some said they considered pursuing one and others reported on the impact of an ongoing or concluded agreement.
Of the 29 companies, eight either have pending APAs or are considering getting one. Ixia, a Calabasas, Calif.-based company, reported in a 10-K filed March 1 with the Securities and Exchange Commission that it's reviewing a revised proposal for a unilateral APA from the Internal Revenue Service. The company first filed the agreement in January 2013, and the two parties have been working to finalize a proposal since September 2016. A unilateral APA involves one taxing authority, while bilateral or multilateral agreements involve two or more.
Denmark-based biotechnology company Bavarian Nordic A/S said in reports filed in 2015 and 2016 that it was contemplating seeking an APA between the Danish and U.S. tax authorities about the tax treatment of potential future revenue received from its cancer treatment drug Prostvac. Other companies with pending APAs known to Bloomberg BNA are:
Eight, or about 28 percent, of the known companies reported about advance pricing agreements between the IRS and the Canada Revenue Agency.
AstraZeneca Plc, a British pharmaceutical company, reported the largest tax benefit as a result of an APA. The company said it recognized a $453 million tax benefit in 2016 due to agreements with Canada, Sweden and the U.K.
Most of the APAs revealed through financial statements were for companies in the medical products and services industry—a total of seven companies.
Two of the companies in the medical products and services industry reported amending or withdrawing from previously entered advance pricing agreements.
Dublin-based pharmaceutical company Allergan said it changed the terms of an APA that was entered into for tax years 2011-17 between the IRS and Warner Chilcott Plc, a pharmaceutical firm that Allergan acquired. The parties agreed in December 2015 to amend the agreement to tax years 2011-15.
Biogen Inc., a Cambridge, Mass.-based biotechnology company, reported in June 2016 that it withdrew from bilateral advance pricing agreement negotiations between Denmark and the U.S.
The IRS Advance Pricing and Mutual Agreement Program is expected to release a report for APAs executed in 2016 at the end of March.
An alphabetized table of the companies mentioning APAs in their SEC filings follows.
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|Company||Year Last Reported||Countries||Comments|
|Activision Blizzard Inc.||2017||U.S.||The Santa Monica, Calif.-based video game company reported in February and in 2016 and 2015 that the IRS has been examining its federal tax returns for 2009-11. The company said that during the second quarter of 2015, it “transitioned the review of its transfer pricing methodology from the advance pricing agreement review process to the IRS examination team.” Activision Blizzard previously reported that it would seek an APA for tax years 2010-16 after the IRS examination.|
|Allergan Plc||2016||U.S.||The Dublin-based pharmaceutical company said it reached an agreement with the IRS in December 2015 to amend an APA previously entered into by Warner Chilcott Plc, a pharmaceutical firm acquired by Allergan. The APA originally covered tax years 2011-17, but was amended to 2011-15, according to a February 2016 filing. It specified the terms under which U.S. Warner Chilcott entities are compensated for distribution and service transactions with the non-U.S. Warner Chilcott entities.|
|Allscripts Healthcare Solutions Inc.||2016||Canada, U.S.||The Canada Revenue Agency and the IRS completed a bilateral APA in 2013 covering 2003-16, according to filings in 2015 and 2016. The Chicago-based health information company reported that in the quarter ended Dec. 31, 2013, it reversed $4.4 million in previously recorded uncertain tax benefits. That benefit was offset by a tax expense of $6.3 million recorded in the same quarter. The company also recorded a $1.6 million tax benefit in the same quarter for “impacts of amended returns” required under the APA.|
|ASML Holding N.V.||2017||Netherlands, U.S.||The Dutch semiconductor company's bilateral APA covers the transfer of intellectual property rights. The company said its effective tax rate for 2016 increased to 19.9 percent before income taxes compared with 12.7 percent in 2015 due to the APA. The APA was obtained as part of the Cymer acquisition in 2013, the company said in a February filing.|
|AstraZeneca Plc||2016||U.K., Canada, Sweden||The British pharmaceutical company said it recognized a $453 million tax benefit due to transfer pricing agreements with the U.K., Canadian and Swedish tax authorities in the third quarter of 2016. The trilateral APA covers tax years 2004-15.|
|Bavarian Nordic A/S||2016||Denmark, U.S.||The Denmark-based biotechnology company said in January 2016 that it was considering applying for an APA between the Danish and U.S. tax authorities over possible new revenue from a potential cancer treatment called Prostvac.|
|Biogen Inc.||2016||Denmark, U.S.||The Cambridge, Mass.-based biotechnology company said in June 2016 it withdrew from bilateral APA negotiations between Denmark and the U.S. for 2010-14. The company had applied for the bilateral agreement in 2014 to resolve issues related to payments for services provided by its wholly owned Danish subsidiary in Hillerod, Denmark. The APA application followed the IRS's disallowance of $130 million in deductions for 2007-09 related to services provided by Danish subsidiaries. The company entered into mutual agreement procedures concerning those transactions.|
|BorgWarner Inc.||2017||South Korea, U.S.||The Auburn Hills, Mich.-based auto parts company said Remy International Inc., which it acquired in 2015, received a signed bilateral APA from the U.S. and South Korean tax authorities in the third quarter of 2016. The agreement covers tax years 2007-14. BorgWarner said it recorded an uncertain tax benefit and related U.S. foreign tax credits of about $44 million due to the APA. After receiving the signed agreement, the company said it reclassified the uncertain tax benefit to a current tax payable, which the company said it paid in the third quarter of 2016.|
|Broadridge Financial Solutions Inc.||2016||Canada, U.S.||The Lake Success, N.Y.-based financial services company said in August 2015 and 2016 that it saw an increase in cash provided by operating activities. The company said the increases were partly due to its Canadian subsidiary receiving a $26.1 million tax refund in 2014 from a prior settlement of an APA between the IRS and the Canada Revenue Agency. The APA covered 2007-12.|
|CBRE Group Inc.||2015||Unknown||The Los Angeles-based real estate firm said in March 2015 that it expected between $22 million and $27.8 million of gross unrecognized tax benefits to be settled during the following 12 months due to the filing of amended returns and the conclusion of an APA.|
|Cognex Corp.||2017||Japan, Ireland||The Natick, Mass.-based industrial automation company said in February 2016 and 2017 filings that it had concluded negotiations for an APA between Japan and Ireland to cover tax years 2014-18, with a retroactive application to 2013.|
|Coherent Inc.||2017||South Korea, U.S.||The Santa Clara, Calif.-based laser systems manufacturer said in a February filing that it agreed to extend the statutes of limitations for its 2011-12 federal tax returns to June 30, 2018, while the U.S. and South Korea negotiate an APA.|
|Contran Corp.||2016||Canada, U.S. Canada, Germany||The APA, covering tax years 2005-15 was initially filed in 2008 and had been in review until 2016. The agreement allowed Contran, the parent of pigment manufacturer Kronos Worldwide Inc., to record a $5.6 million tax benefit. The manufacturer of engineering components also reported that a Canadian subsidiary incurred a C$3 million ($2.3 million) income increase. The company said it expects an APA between Canada and Germany to be finalized in 2017.|
|Edward Lifesciences Corp.||2017||Switzerland, U.S.||The Irvine, Calif.-based company said in 2014 that it had entered into an APA process between the Swiss and the U.S. governments for tax years 2009-13. The application is still pending.|
|Hyster-Yale Materials Handling Inc.||2017||Australia||The Cleveland-based heavy machinery manufacturer said it negotiated an APA with the Australian Taxation Office in 2015, which was finalized in 2016. The APA covers 2016-20. The company said in February that it had released a portion of the valuation allowance of $4.4 million in deferred tax assets during 2015 because of the agreement.|
|Immucor Inc.||2016||Canada, U.S.||The Norcross, Ga.-based medical supplies company said it was negotiating a bilateral APA with the IRS and the Canada Revenue Agency.|
|Ixia||2017||U.S.||The Calabasas, Calif.-based computer and wireless company reported that it is currently reviewing a revised APA proposal from the IRS. The company filed the APA on Jan. 15, 2013.|
|Key Tronic Corp.||2017||Mexico||The Spokane Valley, Wash.-based company signed a unilateral APA with Mexico, according to its February 10-Q. The APA is part of a program affecting U.S. companies with maquiladora operations in Mexico. The agreement would increase tax liability in Mexico by about $400,000 for 2014-16, which would reduce tax liability in the U.S. for 2017 by the same amount. The company said the APA is expected to be finalized late in the third quarter of 2017. The impact of the agreement resulted in about $1.8 million of additional earnings being recognized in Mexico, the company reported.|
|Lululemon Athletica Inc.||2016||Canada, U.S.||The Vancouver-based athletic apparel retailer said it finalized an APA with the U.S. and Canadian tax authorities in the third quarter of 2016. The APA covers issues from 2011-15 and allowed the company to recover nearly $20 million in net income tax, according to a 2016 SEC filing.|
|Minebea Co. Ltd.||2016||Unknown||The Tokyo-based machine and electronics component company said a tax payment related to an APA increased its effective tax rate by 0.4 percentage points.|
|Molson Coors Brewing Co.||2015||Canada, U.S.||The beer conglomerate, based in Montreal and Denver, submitted a renewal application of its bilateral APA between the U.S. and Canadian tax authorities in March 2015. The APA covers past and future tax years.|
|Mosaic Co.||2017||Unknown||The Plymouth, Minn.-based fertilizer and agriculture company said it recognized a domestic tax benefit of $85.8 million in 2016 due to the resolution of an APA, which was offset by a $23.3 million expense from distributions to non-U.S. subsidiaries and an $8.3 million expense for share-based “excess costs.” The company also said in 2015 it received a $14.5 million tax benefit related to the APA. The company entered into the APA in fiscal 2010, according to a 2014 SEC filing.|
|Nike Inc.||2015||U.S.||The athletic apparel company said it saw a decrease in income taxes payable for 2015 due to payments made in the first nine months of 2015, related to a unilateral APA with the IRS during the fourth quarter of fiscal 2014, ending May 31, 2014. Nike also reported that the first six months of fiscal 2015 saw cash outflow of $770 million from changes in working capital, compared with $774 million for the same period in 2014 due to the APA. The agreement covers transfer pricing for 2011-20.|
|Sigmatron International Inc.||2016||Mexico, U.S.||The Elk Grove Village, Ill.-based electronic manufacturing service provider said that in 2016 it had recognized higher pre-tax income in the U.S., and lower pre-tax income in Mexico, compared with the prior year due to the filing of an application for an APA with the Mexican tax authorities in December 2015. The agreement is effective for the 2016-19 fiscal years.|
|Sony Corp.||2016||Japan, U.K., U.S.||Bilateral APAs were filed between Sony and two other taxing authorities for certain subsidiaries within the Sony umbrella, according to a 6-K filing in May 2015. The comapny's gross unrecognized tax benefits decreased to 104.9 billion yen ($1 billion) as of March 31, 2016, from 157.3 billion yen on March 31, 2015, as a result of competent authority requests submitted under the APAs, Sony reported in a 20-F in June 2016.|
|United Parcel Service Inc.||2017||U.S., non-U.S. jurisdictions||The Atlanta-based delivery company said it completed two bilateral APAs in 2015 between the U.S. and “certain non-U.S. jurisdictions,” relating to its small package operations for tax years 2010-19. In February, UPS reported that its adjusted effective tax rate in 2015 decreased to 34 percent from 35.5 percent in 2014 partly due to favorable discrete tax adjustments related to the APA.|
|United Rentals Inc.||2017||Canada, U.S.||The Greenwich, Conn.-based equipment rental company has a pending APA request with the Canadian Competent Authority regarding intercompany transactions. The process has been delayed, according to a January 10-K filing, because of changes in the management and staff in the Canadian Revenue Agency.|
|Visteon Corp.||2016||Japan, U.S.||The Detroit-based auto parts company said it was pursuing a bilateral APA and was expected to file a formal submission in the fourth quarter of 2016.|
|Wesco International Inc.||2016||Canada, U.S.||The Pittsburgh-based electronic distribution and services company reported in 2016 that it concluded an APA between the IRS and the Canada Revenue Agency in 2015. The agreement resolves transfer pricing matters for tax years 2008-18.|
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