Mayer Brown's tax controversy group is one of the most active in the country. The group includes approximately 35 lawyers who have broad experience in the representation of corporate taxpayers in audits, IRS Appeals, and Competent Authority, as well as in the Tax Court, the Court of Federal Claims and other Federal courts. We also have a highly regarded appellate tax practice, representing taxpayers before US Courts of Appeals and the US Supreme Court.

The group has approximately 20 partners, who have an unmatched depth of experience in handling tax controversies. Collectively our attorneys have litigated over 100 tax cases. Reflecting this overall depth of experience and expertise, the International Tax Review has ranked five of our partners among the leading transfer pricing advisors in the United States, a number which exceeds that of any other similarly sized law firm. Joel Williamson, the head of the practice, has been named by the National Law Journal as one of the top 20 tax lawyers in the United States.

Particular areas of substantive expertise within our group include cross-border transfer pricing for goods, services, and intangibles; economic substance issues pertaining to leasing and financial products; tax treatment of tangible and intangible assets in acquisitions; tax accounting issues; offshore insurance operations; issues concerning whether a taxpayer is engaged in a US trade or business or has effectively connected US source income; sourcing of export sales income; manufacturing characterization for Subpart F purposes; and bank taxation, particularly with regard to creditability of foreign taxes and the US implications of foreign country taxation.

We recently litigated two related cases, United Parcel Service and Overseas Partners Ltd., regarding the tax treatment of income attributable to parcel insurance purchased by UPS's shippers. These complex cases involved several issues, including economic substance and transfer pricing issues. The Eleventh Circuit recently vindicated UPS's position on economic substance, reversing the Tax Court's holding on that issue, and remanding the case for further proceedings on the transfer pricing issue. Other significant transfer pricing cases include two major trials in the Tax Court involving the offshore manufacturing operations of National Semiconductor and Seagate Technology, and a trial involving Westreco, Inc., a US research and development subsidiary of Nestlé S.A.

The group has also litigated several other important cases involving economic substance, including the Saba (Brunswick) partnership case, and an important test case in the Tax Court involving Comdisco computer leasing transactions (the Mukerji case).

In addition to transfer pricing and economic substance cases, we recently litigated several significant tax cases. For RJR Nabisco, we litigated a case concerning the tax treatment of its acquisition of the LifeSavers trademark. On behalf of Tele-Communications, Inc. (TCI), we litigated the federal income tax treatment of cable television licenses. We litigated a case for Intel involving the income sourcing rules. In Nestlé Holdings, Inc., we litigated several issues, including valuation and amortization of intangibles and debt-equity characterization, which arose from Nestlé's $3.2 billion acquisition of the Carnation Company. In Riggs National Corp., we litigated the issue of Riggs' entitlement to tax credits for Brazilian taxes imposed on interest paid to Riggs arising from the restructuring of Brazil's debt in the early 1980s. We argued another issue concerning Brazilian taxes in the Bankers Trust case, in which the Federal Circuit reversed an adverse opinion of the Court of Federal Claims. On behalf of the retailer The Limited, we litigated the status of deposits with its wholly-owned national bank for purposes of subpart F limitations on investments in US property.

In December, 2004, we litigated a case for Tribune Company, one of the top media companies in the US, operating businesses in publishing and broadcasting, including newspapers, television stations, and websites in the nation's top three markets. In 2000, Tribune acquired Times Mirror Co., the owner of the Los Angeles Times. As a result of that acquisition, Tribune stepped into Times Mirror's shoes with respect to two 1998 transactions in which Times Mirror had divested itself of Matthew Bender (a legal publishing company) and Mosby (a medical publishing company). At issue in the case was whether the deals were properly structured as tax-free reorganizations (reverse triangular mergers). The adverse Tax Court ruling has received significant criticism in the tax press. We currently represent Tribune in the Seventh Circuit in seeking a reversal. At the heart of the case is the important question of whether the IRS can apply substance-over-form principles to a transaction that meets the literal requirements of the Internal Revenue Code and has an established business purpose. The case therefore stands to have significant consequences to taxpayers across the board, as it may well establish the limitations of Gregory v. Helvering, and can be viewed as a test case for the continuing precedential value of Esmark v. Commissioner, both of which are considered landmark tax cases.

While litigation experience is important in representing clients in tax controversies, skillful representation during audits is equally important. Our attorneys have extensive experience in the representation of clients in large case audits, in answering IDRs, in dealing with IRS agents, and in formulating overall audit strategies. We are also very familiar with the unique problems presented in the transfer pricing audit of a multinational corporation. Our role in the audit depends on the needs of each individual client and the circumstances of each case, including the intensity of IRS counsel's activity in the audit. In some audits, we have played a lead role at the request of the taxpayer, in effect managing the entire audit; in others, we have served a purely advisory role, staying in the background with no direct contact with the IRS.

In recent years, the Internal Revenue Service has been more aggressive in pursuing audits in coordinated examination program cases. In the Westreco case, we were successful in establishing crucial procedural safeguards against abusive audits. Additionally, we have represented several clients, including several of the U.S. Hitachi Group companies and Commodore International Ltd., in successfully defending against Internal Revenue Service summons enforcement cases in federal district court. We are also experienced with the I.R.C. § 6038A information reporting regulations for foreign-owned corporations and the I.R.C. § 6662 transfer pricing penalty regulations. We successfully defended one Hitachi subsidiary (Nissei Sangyo America, Ltd.), against an attempt by the IRS to use I.R.C. § 6038A to force the company to translate thousands of pages of documents from Japanese into English. We represented BP Amoco and Brunswick in two precedent-setting actions by the IRS to obtain tax return preparation software source code.

We have handled many cases in the IRS Appeals Office. We have had substantial experience in negotiations with IRS Appeals officers and in the effective representation of taxpayers before Appeals. In particular, we have recently handled in Appeals several large cases involving customer-based intangibles, transfer pricing issues and corporate issues such as like-kind exchanges and the deductibility of interest on debt incurred to redeem stock. We have also recently been involved in negotiating with the IRS to establish arbitration and mediation procedures used as an alternative to trial for resolving cases.

We have represented several large corporate taxpayers in negotiations between the US Competent Authority and foreign taxing authorities, including several cases which are currently pending.

Another important aspect of our tax controversy practice is our tax appellate practice group. Drawing on the combined experience of members of the tax controversy practice and the firm's appellate practice group, the tax appellate practice group offers a unique combination of technical tax knowledge, broad experience in pursuing appeals in the Courts of Appeals and the Supreme Court, and practical experience in trying tax cases in the courts of first instance. The members of the tax appellate practice group have participated directly in the briefing and argument of cases of major importance to the development of tax law, including Riggs (DC Circuit); Bankers Trust (Federal Circuit); Nestlé Holdings, Inc. (Second Circuit); The Limited and Banks (pro bono) (Sixth Circuit); Continental Illinois Corporation, Cline and Fruit of the Loom (Seventh Circuit); Norwest (Eighth Circuit); Intel Corporation and Boeing Company (Ninth Circuit); Tele-Communications, Inc. and Hukkhanen-Campbell (pro bono) (Tenth Circuit); and United Parcel Service (Eleventh Circuit). They have also played a role in significant Supreme Court tax cases, including Newark Morning Ledger (as amicus curiae).

For most taxpayers, litigation is an option of last resort. Indeed, the vast majority of controversy matters we handle are settled. Nevertheless, it is our philosophy that advantageous settlements are most often achieved when the IRS believes that the taxpayer's counsel is willing and able to litigate effectively if the need arises. We have found that tax litigation is conducted most effectively by lawyers who have a solid background in tax and who are also trained in the unique skills of litigation. For this reason, the attorneys in our tax controversy group spend substantially all of their time on tax controversy matters. This specialization ensures that skillful representation in the courtroom is combined with sophisticated tax advice.