I should just stick to the opinion, but I do link to an earlier article that suggests that the ongoing to and fro between Eaton and the IRS has been quite adversarial (adversarial on steroids). See Patrick Temple-West, Eaton, IRS tangle over cross-border pricing pacts (Reuters 6/17/12), here. The IRS had, for the first time in four years, canceled APAs, Advanced Pricing Agreements between the IRS and the taxpayer as to transfer pricing mothologies, and then, after extensive investigation, issued a notice of deficiency. The article discusses the filing of a Tax Court petition in response to the notice of deficiency. But, apparently toward the end of the audit rancor, the IRS issued those summonses which it sought to enforce. Hence the case I discuss in this blog.
In the summons dispute, the Court's statement of the Background for the case consists almost entirely of Eaton's complaints, in effect, that the the IRS had abused its information gathering tools in a vendetta against Eaton:
The examination of Eaton's 2005 and 2006 tax returns has lasted more than four years, and Eaton asserts that the examination has been extensive in scope. In particular, Eaton asserts that its employees and outside advisors have spent more than 30,000 hours addressing various information requests issued to Eaton by the IRS in connection with the examination. Eaton asserts that it has responded to more than 240 Information Document Requests (the IRS's standard means of communicating written requests for information) by providing written, narrative answers to the IRS's information document requests and producing more than 10,000 pages of documents and "massive amounts of electronic information." In addition, in connection with its investigation, the IRS has conducted a total of 12 site visits to Eaton facilities in the United States, Puerto Rico, and the Dominican Republic, two full days of transcribed interviews each with Eaton's Senior Vice President-Taxes and its Vice President-Federal Tax Strategy, interviews of "multiple third parties engaged in business with Eaton's relevant operations, and eight days of transcribed interviews with a former employee of Eaton's Tax Department, John Semanchik (and in addition is currently seeking an unspecified number of additional interview days with Mr. Semanchik in a separate enforcement proceeding recently filed in the Western District of Pennsylvania). n1
n1 Eaton also asserts that, "in practical terms," the 2005 and 2006 examination ended on December 19, 2011 (just four business days after the summons response date in Case Nos. 24, 26, and 27), when the IRS issued Eaton a Notice of Deficiency asserting tax deficiencies related to Eaton's 2005 and 2006 tax years. Eaton contends the IRS was aware when it served its summonses that Eaton intended to challenge in court any adjustments made by the IRS to its transfer pricing. In fact, on February 29, 2012, Eaton filed a petition with the United States Tax Court challenging the IRS's Notice of Deficiency, Eaton Corp. v. Commissioner, Case No. 5576-12 (T.C. filed February 29, 2012).