Walgreens Boots Alliance (WBA) said in its quarterly report (Form 10-Q) filed with the Securities and Exchange Commission that the IRS is seeking $2.7 billion plus penalties and interest in additional taxes related to a transfer pricing matter.

The quarterly report included the statement that the company "intends to vigorously defend its position on the transfer pricing matter through the IRS's administrative appeals office and, if necessary, judicial proceedings and is confident in its ability to prevail on the merits."

A WBA spokesperson said the company had "valued certain Purchase Options applying the same valuation method to the asset for U.S. GAAP and Federal Income Tax purposes" and the company believes the IRS incorrectly valued those options.¹ The audit is expected to take two to seven years to conclude, according to the spokesperson.²

Implications

This represents another significant transfer pricing audit of a large US multinational enterprise where the IRS has asserted large income adjustments, as well as penalties. We have seen more activity around transfer pricing in recent taxpayer audits for large US multinational enterprises and taxpayers should expect the IRS to focus additional resources in this area.