Three days before filing its latest annual report, Cirrus Logic (CRUS), a fabless semiconductor firm that supplies Apple, learned it may be on the hook for a massive tax bill. The company’s 2017-2019 federal tax returns have been under investigation and now the IRS is proposing an adjustment related to Cirrus’ U.S. taxable income related to the transfer pricing between the company’s U.S. and U.K. affiliated companies.

On May 17, 2022 Cirrus got a back tax bill— including interest and penalties of $63.7 million— stating the company owes $170.5 million. Cirrus does not agree with the IRS's positions and will dispute the proposed adjustments. Without quantifying or providing additional detail, Cirrus says adequate amounts have been reserved for any tax adjustments that may ultimately result.

The tax bill is the equivalent of 52.2% of Cirrus Logic’s net income and 136.7% of operating cash flow for the year ended March 26, 2022.

Cirrus Logic is one of several companies in the midst of transfer pricing disputes with the IRS:

—Facebook expects a $9.7 billion transfer pricing tax bill
—Coca-Cola is fighting a $13 billion transfer pricing tax bill
—Edwards Lifesciences is disputing a $180 million transfer pricing tax bill

Two years ago, the IRS dropped a not so subtle hint that increased transfer pricing scrutiny was on the horizon. In April 2020, the IRS issued guidance outlining best practices and common mistakes in preparing transfer pricing documentation.