Amgen held its earnings conference call on Wednesday for Q1 of 2022. Most notably, the company provided updates on its ongoing litigation with the Internal Revenue Service.
Courtesy Al Seib/Los Angeles Times via Getty Images
Amgen held its earnings conference call on Wednesday for the first quarter of 2022. The company provided updates on its financial status, clinical trials, revenue and most notably, its ongoing litigation with the Internal Revenue Service.
Last year, the IRS sent Amgen a notice of deficiency about its taxes from 2010 to 2012. According to the company’s 2021 second-quarter financial report, the IRS claimed Amgen owed $3.6 billion in back taxes from that three-year period. At the time, Amgen stated that the IRS also proposed significant adjustments to the company’s taxes from 2013 to 2015 and informed it of an incoming audit for the 2016 to 2018 period.
During that report, Amgen made it clear it wasn’t going to take these accusations lying down. One year later, not much has changed.
During Wednesday’s call, Amgen said the IRS has asked for $5.1 billion in back taxes, not including interest, and approximately $2 billion in penalties for the 2012 to 2015 period. This is related to Amgen’s profit transfers from the U.S. to Puerto Rico, where the company houses most of its manufacturing.
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.”
“The amount of the adjustments proposed by the IRS for (the) 2010 to 2015 period overstates by billions of dollars the magnitude of the dispute,” Griffith said. “... Amgen also believes based upon the conditions advanced by the IRS that the IRS adjustments for the 2010 to 2015 period are overstated by approximately $2 billion, due to the IRS’ failure to account for certain income and expenses.”
Griffith said Amgen has reported its income and expenses the same way for “many years,” and in all prior years, the IRS has “appropriately accounted” for them.
“We’ve applied a consistent transfer pricing methodology since 2002. We’ve documented that transfer pricing methodology as is required under relevant tax regulations, and have extensively discussed that methodology with the IRS across multiple tax audits over multiple tax years. The IRS has never previously proposed transfer pricing penalties,” he said.
Amgen stated it has made tax deposits in advance to the IRS, which would reduce the total the IRS requested by $1.1 billion. This dispute could take years to resolve, as Griffith noted in the call.
In July of 2021, Amgen filed a petition in the U.S. tax court to contest the adjustments for 2010 to 2012. This time, Griffith announced Amgen will take a similar approach, and plans to file another petition to contest the latest adjustments for 2013 to 2015.
Griffith concluded the financial update by stating that Amgen is highly confident in its position in the litigations and thanking the company’s colleagues based in Puerto Rico.
“We are grateful to all of our highly skilled colleagues in Puerto Rico and their important and ongoing contribution to Amgen’s mission of serving patients,” Griffith said. “Now, back to the mission of serving every patient every time.”
