Amgen’s $10.7 Billion Case Is Call for Transfer Pricing Clarity

A class-action lawsuit against biopharmaceutical giant Amgen Inc. underscores the importance of corporate transparency, particularly in tax and transfer pricing practices. Having a robust tax and transfer pricing framework to support a company’s position is especially important.

Amgen’s legal challenges stem from allegations it misled investors by failing to promptly disclose that the IRS was seeking $10.7 billion in unpaid taxes and penalties. A federal judge on Sept. 30 denied Amgen’s bid to dismiss the case.

Amgen allegedly disclosed the ongoing IRS audit in its SEC filings but was said to have failed to provide details about the potential back taxes and penalties. It allegedly relied on terms such as “significant” and “substantial,” which was said to have obscured the full scale of its tax liabilities.

In today’s regulatory environment, companies are expected to provide clear, detailed information on their tax positions and intercompany transactions. By being transparent—but in moderation—companies can protect their financial interests while building stronger, more trustworthy relationships with investors and regulators.

Consequences of Disclosure

The fallout from allegedly misleading disclosures can extend beyond financial penalties. Negative publicity from legal disputes can tarnish a company’s reputation, discourage potential investors, and weaken relationships with stakeholders.

Beyond reputational damage, tax authorities around the globe may become more suspicious toward companies that are perceived as avoiding their tax responsibilities. It can be argued that transparent and clear communication about tax liabilities is vital for preserving public trust, minimizing reputational risks, and avoiding additional scrutiny.

Companies also must balance full disclosure with an assessment of how likely the potential tax liability is to come to fruition. Disclosing a potential tax liability that ends up being substantially less could damage a company’s value by overstating the ultimate liability.

Ample judgment traditionally goes into disclosing tax liability and deciding whether tax authorities will prevail. In recent years with the IRS, this often seems to be guesswork as much as reasoned analysis. It is understandable why corporate leaders wouldn’t want to overly worry investors if they truly believed the company wouldn’t have to pay the full IRS assessment.

Transfer Pricing Scrutiny

The Amgen case is part of a broader global trend of tax authorities’ increased scrutiny toward tax and transfer pricing practices. Since the inception of the Base Erosion and Profit Shifting project, many tax authorities have become increasingly vigilant about tax planning strategies used by multinational enterprises to shift profits to low- or no-tax jurisdictions.

Although specific local tax and transfer pricing rules vary, there is growing scrutiny of structures where substantial company profits are subject to tax only in low-tax locations. Guidance such as the adoption of the EU Public Country-by-Country Reporting Directive, as well as the Corporate Sustainability Reporting Directive, exemplify the shift toward increased transparency.

The Amgen case underscores the importance of determining the level of required transparency in disclosures to investors and stakeholders. Ambiguous or opaque disclosures about potential tax liabilities or transfer pricing issues can be perceived as misleading and may expose companies to legal action and erode investor confidence.

But different jurisdictions have different approaches. In Europe, there has been an increasing acceptance of full and transparent disclosure not just for potential tax exposures, but also for a variety of tax related positions, including those with an environmental, sustainability, and governance component.

US multinationals often take a more conservative approach to disclosure, believing less is more. This is due partly to the litigious environment in the US where companies often act defensively rather than proactively and would prefer only to disclose information that’s essential to minimize the risk of making incorrect statements. If a tax liability was overstated, and it damaged the value of the stock, the US company could expect to be sued by investors.

This is why companies should adopt comprehensive policies to ensure all intercompany transactions are properly documented, defensible, and compliant with applicable regulations, with profits appropriately allocated to local jurisdictions. This reduces the risk of prolonged tax disputes and can safeguard a company’s reputation.

By taking a proactive but modest approach to tax transparency, companies may be able to reduce the risk of lawsuits such as the one Amgen is facing.

The case is Roofers Loc. No. 149 Pension Fund v. Amgen Inc., 2024 BL 343743, S.D.N.Y., 23 Civ. 2138 (JPC), 9/30/24.

This article does not necessarily reflect the opinion of Bloomberg Industry Group, Inc., the publisher of Bloomberg Law and Bloomberg Tax, or its owners.

Author Information

Rezan Ökten is partner and head of transfer pricing at Dentons’ Amsterdam office.

Linda Pfatteicher is partner in Dentons’ venture technology group focused on international corporate tax and operational structuring.

Davy Schoorl is an associate at Dentons’ transfer pricing practice in Amsterdam.

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