On January 27, 2026, the U.S. District Court for the Western District of Michigan approved a proposed judgment for a $89.2 million refund to a US company for overpaid federal income tax, interest and penalties in a transfer pricing case that applied the economic substance doctrine for the first time (Perrigo Co. v. United States, No. 1:17-CV-737 (W.D. Mich. Jan. 27, 2026).

In September 2025, the court had found that Perrigo Co.'s assignment of the supply and distribution of a generic omeprazole product to an Israeli affiliate had economic substance. Therefore, the IRS should not have reallocated the income to Perrigo Co., which is entitled to a refund of the taxes it paid, along with the penalties and interest. The court then asked the parties to submit a proposed final judgment consistent with the court's rulings within 30 days.

For the facts and analysis of the September 2025 opinion, see Tax Alert 2025-2161.

Implications

The judgment confirms that the district court's conclusions on economic substance, transfer pricing and penalties were fully reflected in the final disposition. Although limited to its facts, the case underscores the importance of contemporaneous business planning, risk assumption and transfer pricing analyses in cross-border restructurings. The approved judgment may also be relevant to ongoing audits, appeals discussions and litigation involving similar issues.