Law360 featured commentary from Lauren Ross and Joanne Fay in an article examining key international tax disputes, transfer pricing cases, and cross-border tax controversies expected to shape tax law and enforcement trends through the remainder of 2026.
Lauren discussed the ongoing Coca-Cola transfer pricing dispute with the Internal Revenue Service (IRS), a closely watched case involving the company's 2007–2009 tax years. Coca-Cola is challenging the IRS's decision to replace a transfer pricing methodology that had been accepted for more than a decade with a different approach that significantly increased the company's U.S. tax liability. The appeal focuses on whether the IRS lawfully departed from a long-standing arrangement and adequately justified that change. During oral arguments on June 25, judges on the U.S. Court of Appeals for the Eleventh Circuit questioned whether the agency acted arbitrarily in abandoning a position reflected in a closing agreement on which Coca-Cola had relied.
According to Lauren, the court's interpretation of the "arbitrary and capricious" standard will be relevant not only in future transfer pricing cases but in tax cases more generally. She said that first, there's the question of whether the IRS' inconsistent treatment of similar transactions makes its adjustments arbitrary and capricious. Second, there's the issue of what Coca-Cola has termed the IRS' "bait and switch" and what the judges referred to as "retroactivity," Lauren said.
"You could see the resolution of either or both of these points in favor of the taxpayer affecting how the IRS works up cases and seeks to resolve cases going forward," she said. "If exam resolutions and appeals settlements become stickier, you could see the IRS becoming more reluctant to reach resolutions with taxpayers in disputes."
Lauren also shared her perspective on the Amgen transfer pricing dispute, which centers on the IRS's claim that the biotechnology company improperly shifted profits to its Puerto Rico manufacturing subsidiary, Amgen Manufacturing Ltd. (AML), through royalty rates that were set too low. The case addresses whether AML legitimately earned the profits attributed to it based on its manufacturing functions, expertise, and assumed risks, or whether those profits should have been reallocated to the United States under the IRS's Comparable Profits Method (CPM) analysis. The dispute is being closely monitored because of its potential impact on transfer pricing methodology, benchmarking practices, and future tax audits involving multinational companies.
According to Lauren, Amgen is going to be an important precedent going forward for existing disputes involving the CPM versus another method, and for taxpayers that are just trying to ensure everyday benchmarking compliance.
"Because if a high comparability standard is adopted, which is what the taxpayers are advocating for, taxpayers will have to closely look at the comparable sets that they're using today, and perhaps even change their methods," she said.
Lauren added, however, "if the government wins out and the court adopts a low comparability standard, taxpayers will have more flexibility, but the IRS will also have a very broad power to propose adjustments."
Joanne commented on the Liberty Global case, another significant international tax matter that practitioners are following closely. The case stems from Liberty Global's June 5 request for a panel or en banc rehearing after an April decision by a divided Tenth Circuit panel. In a 2-1 ruling, the court determined that the telecommunications company was not entitled to a $2.4 billion tax deduction related to transactions with foreign affiliates.
The case has emerged as a potentially influential precedent on the application of the economic substance doctrine, which allows the IRS to challenge transactions that comply with the technical requirements of the tax code but may lack sufficient non-tax business purpose or economic effect. Tax professionals are closely watching the litigation because its outcome could affect cross-border tax planning, transactional structuring, and the predictability of tax outcomes for multinational businesses.
Joanne said there may be "a bit of paralysis in the marketplace" because the cases to date do not provide effective guidance on how taxpayers should plan. The stakes are also high because the IRS could assert a 40% penalty that is strict liability, she said.
"That is really, I think, what should get people's attention and focus the mind," Joanne said.
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