We represent many of the world's largest food, transportation, banking and financial, apparel, healthcare, industrial, pharmaceutical and technology companies, as well as high-net-worth individuals and high-value estates. Our team advises on all phases of a tax controversy, including audits, administrative procedures, administrative appeals, and litigation at the trial and appellate court levels. And, in collaboration with our International Tax & Transfer Pricing team, we have significant experience representing corporate taxpayers in transfer pricing matters involving litigation as well as competent authorities.
The quality of our counsel is consistently recognized by Chambers and Partners, Legal 500 and International Tax Review. For example, in 2022, we ranked in the top tier in Chambers USA and Legal 500 US for the 17th and 16th consecutive year, respectively.
We understand that an efficient and successful resolution to a tax controversy begins with skillful representation before court involvement, whether during an audit, an administrative procedure or an administrative appeal. In fact, we resolve the vast majority of our clients’ tax controversies at these administrative stages. And our role is shaped by the needs of each client and the circumstances of each case; we might play a lead role, for example, managing an entire audit, or a purely advisory role, staying in the background with no direct contact with government agents.
What’s more, when the situation warrants it, we combine our skills with those of Mayer Brown’s appellate lawyers to provide clients with the greatest opportunity for success.
United States – Administrative Audits and Appeals
Mayer Brown is one of a select few firms in the United States with extensive experience resolving complex corporate and international disputes involving federal taxes. But we also understand the value of avoiding controversies and are regularly engaged by taxpayers seeking pre-filing agreements (PFAs) and advance pricing agreements (APAs).
For our clients facing US Internal Revenue Service (IRS) audits, we develop audit strategies, answer information document requests (IDRs), claim privilege, prepare for interviews and site visits, and interact with IRS teams. We resolve major disputes at the audit level by drawing on our substantive tax experience and deep knowledge of the IRS and procedural rules.
Our team regularly represents clients before IRS appeals officers throughout the country in both Fast Track and regular appeals.
United States – Tax Litigation
Few firms can match our tax litigation experience. Our team has tried more than 100 tax cases before the Tax Court, Court of Federal Claims, and federal district and appeals courts. Over the past 10 years alone, we represented clients in more than 25 dockets in the US Tax Court challenging total federal income adjustments in excess of $10 billion.
Our team also regularly works with our highly rated State & Local Tax team in state tax controversy litigation and with our International Tax & Transfer Pricing team in competent authority proceedings.
We work closely with appellate lawyers in Mayer Brown's renowned Supreme Court & Appellate practice, combining our trial experience and technical tax knowledge and their experience arguing at the circuit court level and the Supreme Court.
Our most recent victories at trial include cases for FMR LLC (Fidelity) involving a refined coal project and an appeal, for Tribune Media Company involving a leveraged partnership transaction and the disguised sale rules, and for Eaton Corporation involving the IRS’s cancellation of the taxpayer’s APAs and an appeal.
Europe – Administrative Audits and Appeals
We represent national and global corporate and individual clients and investment funds from the audit phase or the simple request of information by tax authorities to administrative and judicial appeals. Our team also intervenes in the negotiation of tax rulings and litigation related to the refusal of these tax rulings before administrative commissions. In addition, we support our corporate clients in tax investigations (including tax dawn raids and criminal investigations, tax compliance measures, defense against criminal or administrative penalties, and negotiations with prosecutors).
We also assist our clients in tax-related M&A controversies and effective post-M&A claim management.
Over the years, we have built a systematic and methodological approach to communicating with tax authorities that facilitates discussion and negotiation. We also make use of little-known administrative procedures to unlock situations that are at a standstill.
We have advised and negotiated with the tax authorities in cases related to, among other matters, cross-border transfer pricing for goods, services or intangibles, tax treatment of intragroup restructurings (merger, spin-offs, etc.), tax residence of foreign subsidiaries, economic substance, anti-hybrid rules, withholding taxes on dividends, interest or royalties, use of foreign tax credits, and abuse of law.
In most matters in recent years, the tax authorities eventually abandoned their tax reassessment.
Europe – Tax Litigation
Litigation is often an option of last resort. The vast majority of the controversy matters we are in charge of are settled with the tax authorities before litigation becomes necessary. But favorable settlements can only be achieved when the tax authorities are aware that our lawyers are willing and able to litigate if the need arises. They are, and we are.
We have a solid background in domestic and international taxation and a deep knowledge of litigation procedures, particularly when it comes to supranational EU law, which is becoming increasingly important resolving high-level international tax disputes.
Brazil – Audits, Administrative Procedures and Appeals
In Brazil, we assist clients with handling large case audits, answering tax inspection notifications, dealing with tax authorities, and formulating overall audit strategies.
We have also assisted clients within administrative procedures before tax authorities to obtain licenses to import and export, comply with special customs regimes (e.g., REPETRO, Drawback, etc.), enroll and register to issue invoices, as well as issuance of tax clearance certificates.
We have substantial experience representing taxpayers before the Taxpayers Council of Administrative Appeals (CARF) and other Tax Administrative Courts. Although the Brazilian legal system does not allow negotiation between taxpayers and tax authorities, recently tax legislation was changed in order to admit tax settlements as an alternative for resolving cases. Consequently, we have begun assisting clients in the procedures of tax settlements and in adhering to tax installments programs handled by federal, state and municipal spheres.
Brazil – Tax Litigation
Not only do we have a solid background in tax, we are also trained to litigate tax matters at the lower and superior court levels.
We have successfully represented taxpayers on appeal from lower court decisions in major tax cases and have participated in the briefing and argument of cases of major importance to the development of tax law. Our presence in Brasília, including partner Luis Adams, former attorney general of Brazil and counsel at Brazilian IRS, brings deep experience dealing with the Superior Court of Justice and the Supreme Court in tax cases.
United States – Litigation
- Tyco Electronics Corporation, ADT Holdings, Inc., United States Surgical Corporation (15 related U.S. Tax Court dockets). We represented several companies in defending the debt characterization of intercompany loans, implicating over $6.5 billion in tax, interest, and penalties. Settled prior to trial for 5% of the amount in dispute.
- Boston Scientific Corporation. We represented Boston Scientific and its subsidiaries in transfer pricing litigation in the US Tax Court. Settled prior to trial with favorable royalty rates, the case resolved $4 billion of transfer pricing adjustments, along with penalties and related adjustments that were before the Tax Court, and included favorable settlements in subsequent, non-docketed tax years.
- Tribune Media Company; Chicago Baseball Holdings, LLC. We represented Tribune in challenging the IRS’s application of the disguised sale rules to a leveraged partnership structure through which Tribune divested a 95% interest in the Chicago Cubs. The US Tax Court’s opinion respected the leveraged partnership and the majority of the debt used to finance the transfer.
- Hyatt Hotels Corporation. We are representing Hyatt in a case concerning the treatment of Hyatt’s customer loyalty program. The trial occurred in April of 2022.
- FMR LLC (Fidelity). We achieved a rare bench opinion in favor of Cross Refined Coal LLC and its partners, Fidelity Investments, Schneider Electric and AJ Gallagher, in the US Tax Court. The case challenged the IRS’s position that a partnership established to produce refined coal should be disregarded for federal income tax purposes. In August 2022, we secured an additional win on appeal. The DC Circuit published an opinion affirming a ruling from the Tax Court determining that Cross was a bona fide partnership. To the best of our knowledge, this is only the second bench opinion issued by the Tax Court in a major corporate tax case, the first being in Mukerji, also litigated by Mayer Brown.
- Consolidated Edison. We represented Consolidated Edison in a case before the US Court of Federal Claims involving the income tax treatment of a lease-in-lease-out (LILO) transaction (reversed at the Court of Appeals for the Federal Circuit). The trial court victory at the Court of Federal Claims represents the only time a large corporate taxpayer prevailed in a LILO case.
- Westreco (Nestlé). We represented Nestlé in challenging the IRS’s allocation of R&D fees under Section 482. The US Tax Court held entirely in favor of Nestlé, finding that the taxpayer’s return position clearly reflected income.
- Eaton Corporation. We represented Eaton in its groundbreaking challenge to the IRS’s cancellation of two Advance Pricing Agreements (APAs) and the IRS’s adjustments under section 482. The Tax Court vindicated Eaton on all allegations, determining that the IRS’s cancellation of the APAs was an abuse of discretion, giving the taxpayer a rare 100% victory in a transfer pricing dispute. In August 2022, we secured with co-counsel an additional win on appeal.
- Flextronics. We represented Flextronics before the US Tax Court and the Ninth Circuit concerning an acquisition of a North Carolina manufacturing facility completed by a subsidiary, C-MAC Holdings, prior to the time it was acquired by Flextronics. At issue was whether the assets acquired by C-MAC received a step-up in basis under sections 357(c) and 362.
- National Semiconductor and Seagate Technology. We represented National Semiconductor and Seagate Technology in mega transfer pricing cases involving their offshore manufacturing operations.
- Nestlé Holdings, Inc. We litigated several issues for this client, including valuation and amortization of intangibles and debt-equity characterization, which arose from Nestlé's $3.2 billion acquisition of the Carnation Company.
- Mukerji (Comdisco). We represented taxpayer in defending the deductibility of expenses related to computer leasing, resulting in a bench opinion rejecting IRS arguments that the leases were shams and lacked economic substance.
- Tribune Company. We represented the Tribune Company in a case presenting the question of whether substance-over-form theories permit recharacterization of a transaction that was structured to comply with the requirements of the Code and Regulations for nontaxable reorganizations. The matter was settled at the Seventh Circuit Court of Appeals
United States – Appellate
- DC Circuit. FMR (Fidelity) (refined coal credit, won on appeal following the Tax Court’s bench opinion in favor of taxpayer); Riggs (litigated before the DC Circuit on three occasions; holding that official tax receipts of the Brazilian government were entitled to evidentiary presumption)
- Federal Circuit. Bankers Trust (reversing the Court of Federal Claims on a Brazilian "pecuniary benefit" foreign tax credit issue)
- Second Circuit. Nestlé Holdings, Inc. (I.R.C. § 482 reallocations, Carnation acquisition)
- Fourth Circuit. Volvo Group North America, Inc. (vacating a district court decision on an application of I.R.C. § 471 to inventory transfers)
- Sixth Circuit. The Limited (reversing the Tax Court's holding that CFC's purchase of CDs from an affiliated credit card bank failed to qualify as § 956(b)(2)(A) "deposits with [a] person carrying on banking business")
- Seventh Circuit. Continental Illinois Corporation (Brazilian foreign tax credits, foreign tax credits relating to net quoted loans, and recognition of income on CAP loans)
- Eighth Circuit. Norwest (Brazilian foreign tax credits)
- Ninth Circuit. Intel Corporation (allocation of income partly from sources within a foreign country under Treas. Reg. § 1.863-3(b)(2)); Flextronics (step-up in basis under Sections 357(c) and 362, upholding a taxpayer victory at the Tax Court)
- Tenth Circuit. Tele-Communications, Inc. (application of I.R.C. § 1253 to cable television franchises)
- Eleventh Circuit. United Parcel Service (vacating the Tax Court's finding on sham, assignment of income and penalties)
- US Supreme Court. Boeing (allocation of R&D costs in determination of sales income under DISC and FSC rules)
Europe – Administrative Audits and Litigation
- We represented taxpayers in contentious audits and appeals concerning triangular B reorganizations and the application of Treas. Reg. § 1.367(b)-10.
- We represented a leading telephone company established in the French West Indies in a tax audit regarding the deduction of the financial expenses it incurred acquiring of a large French operator.
- We assisted the managers of a French financial services company on a tax audit concerning their management packages for a tax reassessment of several million of euros.
- We assisted a French group specializing in business process outsourcing in an audit concerning the tax deductibility of interest expenses.
- We assisted a major French overseas group specializing in the luxury hotel sector in its discussions with the local tax authorities to settle a question concerning the application of capital gains exemption.
- We assisted managers of a French group specializing in wealth management in an audit procedure regarding the recharacterization of capital gains as salary.
- We assisted a French management company of a major investment fund in an audit regarding VAT and wage tax reassessment.
- We assisted a British corporate group in its discussions with the French tax authorities regarding the deductibility of interest of a French subsidiary operating in the hotel industry.
- We assisted a real estate investment and asset manager in its discussions with the French tax authorities regarding the deductibility of VAT expenses in the context of the sale of real estate assets.
- We assisted a French group operating camping and holiday villages in an audit concerning VAT reassessments.
- We assisted a French leading company in the field of energy saving certificates in a tax audit regarding recovery of VAT and the deduction of the payments accrued to service providers.
- We assisted the French management company of an investment fund during the entire tax audit procedure concerning VAT and payroll tax reassessments.
- We assisted a group specializing in public works in the context of a tax audit on a number of grounds, in particular the treatment of expenses incurred on the sale of equity securities in relation to corporation tax.
- We assisted various corporate groups in their discussion with the French tax authorities regarding the deductibility of the groups’ interest expenses paid to shareholders.
- We assisted in the tax audit of three companies of the same group in the translation business services in connection with a litigation regarding a withholding tax on services.
- We represented a high-net-worth individual before the Tribunal administratif de Paris in a case involving the tax characterization of gains deriving from a LBO-type "management package."
- We represented a collection agency before the German Federal Tax Court involving the determination of an arm’s length interest rate for a subordinated and unsecured intercompany loan granted in parallel to a senior secured bank financing (German Federal Tax Court Ruling of 18 May 2021. Case no. I R 62/17).
Brazil – Administrative Audits and Litigation
- Sony Mobile Communications do Brasil Ltda. We represented Sony Mobile in an administrative proceeding resulting from a tax assessment issued by the State of São Paulo in order to disregard the ICMS (State VAT) credits appropriated by the company and impose penalties, in the amount of BRL 500 million, and we managed a significant reduction in the debt, correspondent to about 85% of the original tax assessment.
- Norsk Hydro do Brasil Ltda. We represented Norsk Hydro in two writ of mandamus, filed in Pará and in Rio de Janeiro, for the enforcement of the provisions of the Double Taxation Treaty (DTT) executed between Brazil and Norway in order to enable the cross-border remittances of services fees from Norsk to the beneficiaries in Norway without the levy of the Brazilian withholding income tax, pursuant to article 7 of the DTT and to ensure the reimbursement of the undue payments made in the past five years.
- TIM S.A. We represented TIM in several tax litigations, including a tax foreclosure filed by State of São Paulo in order to collect ICMS (State VAT) in the approximate amount of BRL 702 million, which we managed to reduce almost 50% of the tax assessment and an administrative federal proceeding charging the goodwill amortization quotas from Corporate Income Tax (IRPJ) and Social Contribution on Net Income ("CSLL") tax basis and involving an amount of approximately BRL 1.3 billion.
- Climazon Industrial Ltda. (Springer Carrier group). We represented Climazon in several tax litigations, including an administrative federal proceeding resulting from a tax assessment issued by federal authorities charging the payment of Corporate Income Tax (IRPJ) and Social Contribution on Net Profit (CSLL) due to alleged noncompliance with the transfer price (Resale Price Less Profit - method with a 20% fixed margin - "PRL 20"), in an amount totaling BRL 515 million.
- Onesubsea do Brasil Serviços Submarinos Ltda.(Schlumberger Group). We represented Onesubsea in several tax litigations of more than BRL 300MM, including an administrative federal proceeding charging the payment of taxes due upon the importation of goods suspended by the Drawback regime and two lawsuits regarding compliance with REPETRO´s requirements for purposes of cancellation of ICMS charge.
- Confidential Client. We represented a leading drilling contractor in several tax litigations, in the approximate amount of BRL 700MM, including administrative federal proceedings issued by the Brazilian Internal Revenue Service (IRS) due to the understanding that the contractual split between charter and services agreement was artificial.
- TotalEnergies Group. We represented TotalEnergies Group in several tax litigations, including judicial measures to eliminate WHT on imported services payments in view of the tax exemption established by DTT executed between Brazil and France and administrative federal tax assessments of more than BRL 200MM issued by the Brazilian IRS against TotalEnergies Petróleo charging IRPJ and CSLL due to the challenge of deductibility of expenses and calculation basis of financial revenues, which was canceled by a unanimous second-level administrative decision.
- Vibra Energia S.A. (current corporate name of Petrobras Distribuidora S.A.). We represented Vibra Energia, in lower and superior courts, in a tax foreclosure filed by State of Amapá aiming the charge of ICMS (State VAT) due to diesel sales, worth more than BRL 500 MM, which was later canceled by Amapá due to the tax debt waiver.
- Telesat Brasil Capacidade de Satélites Ltda. We represented Telesat in several administrative and judicial tax litigations, in the approximated historical amount of BRL 300MM, including filing a judicial measure in order to cancel several tax assessments filed by the State of Rio de Janeiro to charge ICMS (State VAT) due to satellite capacity leasing. The first-level decision determined the cancelation of the assessments.