In its latest annual report, II-VI Incorporated (IIVI), a laser manufacturer serving the semiconductor, data center and electric vehicle industries, indicated a costly battle with the IRS is underway. In its boilerplate warning regarding taxes, the company inserted new language indicating its transfer pricing is now being scrutinized:

“This includes challenges to our intercompany transfer pricing arrangements and charges and the appropriate level of profitability for our entities.”

Over the past two years we’ve documented an IRS transfer pricing crackdown which has resulted in the following disclosures:

—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
—Cirrus Logic is challenging a $170.5 million transfer pricing 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.