IRS Transfer-Pricing Crackdown Chases Billions Offshore

For generations, corporate America has padded earnings by routing income through lower-tax countries overseas in transfer-pricing arrangements. Those tactics saved firms at least $11bn in 2025 alone, estimates the FACT Coalition, an advocacy group. Now the IRS wants a portion returned.

Washington quit the global pact — but not the fight

Plenty of executives exhaled when Donald Trump, on his first day back in the Oval Office last year, declared America was quitting a global pact engineered by his predecessor to impose top-up levies on tax-averse multinationals. Yet anyone who assumed that spelled the finish of official bids to capture more of profits recorded offshore was wrong.

In May this year UnitedHealth, an American insurance giant, revealed the Internal Revenue Service (IRS) was chasing it over earnings assigned to an overseas unit, with the agency insisting it had underpaid its taxes back home. The action forms part of an IRS campaign that started under the Obama administration to tighten enforcement around so-called transfer pricing — an initiative the Trump administration has shown no sign of resiling from. Many billions of dollars are at stake.

Coca-Cola and the $20bn ‘Super Bowl’ dispute

Amgen, a biotech firm, and Meta, owner of Facebook and Instagram, are among the firms locked in transfer-pricing battles with the IRS. Still, the action against Coca-Cola, the world’s most valuable drinks company, has been dubbed the “Super Bowl of transfer-pricing controversy”. (Tax lawyers are easily entertained.)

That dispute, running for more than ten years, could finally conclude in the coming months. In 2015 the IRS told Coca-Cola it owed an additional $3.3bn in tax for the period from 2007 to 2009, arguing that the company had improperly parked profits arising from intellectual property — including its famous logo — overseas.

The fight has spent years winding its way through the courts, during which time Coca-Cola has continued to follow the same tax practices. Consequently, the sum in question has ballooned to as much as $20bn.

Coca-Cola argues that its foreign subsidiaries have made valuable marketing investments worthy of the astronomical returns on capital it has attributed to them. It also contends that it is merely sticking with an agreement the company reached with the IRS back in 1996 on how the company could split its profits (though that deal related to past earnings).

Calm in public, billions on the line

Coca-Cola and other targets of the IRS transfer-pricing drive have stayed strikingly calm, at least in public. As of July the drinks giant had squirrelled away just $530m to pay a tax bill that could amount to as much as $14bn in the event of a loss (the company has already shelled out $6bn, which it would be refunded if it wins).

In July Amgen settled an investor lawsuit that accused it of underselling the risks of its fight with the IRS. Its disclosures were like “a child telling his parents that he had ‘dessert’ when in fact he had eaten the ‘whole cake’”, noted a federal judge during the case.

Success in its biggest transfer-pricing suits would let the IRS claw back roughly $100bn in additional taxes from a small group of firms, including penalties and interest, notes Steven Wrappe of Grant Thornton, an accountancy. That amounts to about a fifth of the total corporate-income tax that the American government collected in 2025.

Why transfer-pricing fights are likely to grow

Near-term, widening the crusade would be difficult; the IRS’s budget has been slashed under Mr Trump, meaning its staff are already stretched. Over a longer horizon, though, transfer-pricing disputes will probably increase.

One driver is the growing share of firms’ value that comes from the kind of intangible assets that facilitate cross-border tax dodges, because they do not need to be physically moved. From 1975 to 2025 the share of the total value of firms in America’s S&P 500 index that can be attributed to intangible assets rose from 17% to 92%, according to Ocean Tomo, an advisory firm.

Another reason to expect more of these cases is that — as bond-market investors know too well — America’s government debt continues to soar. Its multinationals may soon have to foot a bigger share of the bill. ■

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