3M Urges Court to Limit IRS Power to Reallocate Brazil Royalties

The Eighth Circuit should stop the IRS from reallocating almost $23.7 million of 3M Co.‘s royalty income from its Brazilian subsidiary to the US parent for tax purposes because the relied-upon tax code regulation is substantively and procedurally invalid, the company said in an appellate brief.

3M challenged a $4.8 million notice of deficiency issued by the IRS after it allocated more than $23 million in additional income under IRC Section 482 to reflect the arm’s-length compensation the agency says 3M do Brasil Ltda. should’ve paid its parent for intellectual property. The company appeals a US Tax Court ruling ...