Faulting IRS, Appeals Court Remands 3M Transfer Pricing Dispute

The IRS overstepped its authority when it increased 3M Co.‘s tax bill to reflect what the US parent company’s income would’ve been had it not been in control of its Brazilian subsidiary, the Eighth Circuit said Tuesday.

The US Court of Appeals for the Eighth Circuit reversed the IRS’s victory, holding that allocation powers Congress granted the agency under IRC Section 482don’t support the agency’s actions in the case, nor can the IRS preempt the statute with the Treasury’s “blocked income” rule, 26 CFR Section 1.482-1(h)(2).

3M appealed the US Tax Court’s plurality ruling that the IRS ...