Amgen to fight IRS tax claims related to its Puerto Rico operations
By The Star Staff
During a conference call this week to report earnings for the first quarter of 2022, biotechnology firm Amgen revealed that the IRS is claiming some $7 billion in taxes plus interest for the period between 2012 and 2015 related to its profit transfers from the mainland United States to Puerto Rico.
The company has operations in Juncos, where it employs some 2,400 people.
On April 18, Amgen said it received a notice of deficiency from the IRS for the 2013-2015 period proposing adjustments primarily related to the allocation of profits between certain of the company’s entities in the mainland U.S. and Puerto Rico similar to those previously proposed by the IRS for the 2010-2012 period.
“This notice seeks to increase Amgen’s U.S. taxable income for the 2013-2015 period by an amount that would result in additional federal tax of approximately $5.1 billion, plus interest. In addition, the notice proposes penalties of approximately $2 billion,” the firm said in its report Wednesday. “Amgen firmly believes that the adjustments proposed by the IRS for the 2010-2015 period and the penalties proposed by the IRS for the 2013-2015 period are without merit.”
Peter Griffith, the company’s executive vice president and chief financial officer, stated on the call that the adjustments and penalties the IRS proposed are without merit. He also said the IRS assertion of $2 billion in penalties for the 2013 to 2015 period is “wholly unwarranted.”
Puerto Rico is the site of the company’s flagship manufacturing complex responsible for the majority of Amgen’s global manufacturing. Amgen has had a substantial manufacturing presence in Puerto Rico for 30 years, and the company’s Puerto Rico subsidiary produces sophisticated biologic medicines for millions of patients around the world.
“The many valuable contributions of the Company’s Puerto Rico subsidiary include the effort and expertise of its 2,400 highly skilled staff members, the nearly $4 billion in capital investments it has made on the Island, the valuable assets it possesses, and the significant risks it has assumed in connection with its business,” the report reads. “It is through these investments that Amgen has been able to meet the needs of every patient, every time.”
“Amgen’s allocation of profit between its U.S. and Puerto Rico entities appropriately recognizes the key contributions made by the company’s Puerto Rico subsidiary,” the firm said. “The IRS position fails to adequately account for the importance of these value drivers. The proposed adjustments would result in Amgen’s Puerto Rico subsidiary earning little or no profit from its operations despite the value of and risk associated with its contributions.”
The IRS audited Amgen at length for many years on the allocation of profit between the U.S. and Puerto Rico. The audits were resolved through agreements with the IRS, resulting in no financial statement detriment to the company, the firm said.
“Further, the amount of the adjustments proposed by the IRS for the 2010-2015 period overstates by billions of dollars the magnitude of the dispute: Amgen believes, based upon the positions advanced by the IRS, that the IRS adjustments for the 2010-2015 period are overstated by approximately $2 billion due to the IRS failure to account for certain income and expenses,” the firm said.
Amgen has reported its income and expenses in a consistent manner for many years, the company said, and the IRS has appropriately accounted for its income and expenses in all prior audits.
“Any additional tax that could be imposed for the 2010-2015 period would be reduced by up to approximately $3.1 billion of repatriation tax previously accrued with respect to the Company’s Puerto Rico earnings,” the firm said. “Amgen previously made advance tax deposits to the IRS totaling $1.1 billion for the 2010-2015 period. These deposits would further reduce any additional cash tax that could be imposed. In addition, Amgen believes the IRS assertion of approximately $2 billion in penalties for the 2013-2015 period is wholly unwarranted.”