The Tax Management Transfer Pricing Report ™ provides news and analysis on U.S. and international governments’ tax policies regarding intercompany transfer pricing.
July 11 — Oracle Corp., HP Inc., Sony Corp. and other large technology companies reported that amounts held in reserve for potential tax assessments may decrease over the next year due to changes in the status of international taxation and transfer pricing issues.
The companies were among nine reporting significant transfer pricing issues, or the resolution of those issues, to the Securities and Exchange Commission in June. An alphabetized list follows; excerpts from the SEC documents appear in the Text section.
Cooper Companies Inc., a Pleasanton, Calif.-based medical company, said $10 million of its unrecognized tax benefits as of Nov. 1, 2015, related to tax positions that could “significantly change” over the next 12 months—largely relating to transfer pricing.
Dr. Reddy's Laboratories Ltd., an Indian pharmaceutical company, said it is currently appealing a disallowance from the Mexican tax authorities regarding its subsidiary, Industrias Quimicas Falcon de Mexico S.A. de CV, with a total tax impact of 663 million rupees ($10 million).
EMC Corp., a data management and technology services company based in Hopkinton, Mass., said that transfer pricing contributed to $372 million in tax benefits as of Jan. 29, 2016, which helped offset accrued interest and penalties of $950 million relating to $3.1 billion in unrecognized tax benefits.
Herman Miller Inc., a Zeeland, Mich.-based furniture company, said it made a $2 million favorable transfer pricing adjustment during the fourth quarter of fiscal year 2016, which was the primary factor in a reduction of its effective tax rate to 24.9 percent from 29.5 percent for the same period in the previous year.
HP Inc., a Palo Alto-based computer hardware company—formerly part of Hewlett-Packard Co.—said it believes its unrecognized tax benefits could be reduced by $2 million over the next 12 months due to issues including transfer pricing. In April, the company reported that its reserve could be reduced by $22 million for similar issues.
Lululemon Athletica Inc., a Vancouver-based athletic apparel company, said it recorded a net income tax recovery of $5.6 million in the first quarter of fiscal 2016 due to transfer pricing arrangements and “the associated plan to repatriate foreign earnings.”
Medtronic Plc, a medical device company based in Dublin, said it is “reasonably possible” that within the next 12 months its unrecognized tax benefits could decrease by as much as $500 million, due in part to the “resolution of tax matters with the U.S. Tax Court, Appeals Division of the IRS.” The U.S. Tax Court on June 9 issued an opinion agreeing largely, although not entirely, with the company's position in a dispute with the Internal Revenue Service over the pricing of manufacturing intangibles (25 Transfer Pricing Report 140, 6/16/16).
Medtronic also said it paid $10 million in the fourth quarter of fiscal year 2016 due to a settlement in another U.S. Tax Court case involving intercompany debt (24 Transfer Pricing Report 1148, 1/21/16).
Oracle Corp., a Redwood City, Calif.-based software company, said its gross unrecognized tax benefits as of May 31, 2016, could decrease by as much as $199 million over the next 12 months, due to issues including transfer pricing.
Sony Corp., the Japanese electronics and entertainment giant, said its gross unrecognized tax benefits decreased to 104.9 billion yen ($1 billion) on March 31, 2016, from 157.3 billion yen on March 31, 2015, due to matters including competent authority requests submitted under bilateral advance pricing agreements.
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