Conoco Suit Highlights Conflict in State Transfer Pricing Audits

Louisiana’s court battle against oil and gas giant ConocoPhillips Co. over an alleged pattern of profit shifting to mitigate tax liabilities has illuminated the opaque world of state transfer pricing disputes and raised concerns about a more aggressive audit environment.

On one side, progressive tax policy groups are cheering Louisiana’s ambitious legal strategy, which could sting Houston-based Conoco with a tax bill north of $700 million for seven years of unpaid taxes, plus penalties and interest.

The department’s lawsuit, filed late last year, alleges Conoco deliberately distorted its profitability through related-party purchases and sales of oil, natural gas and ...