Pharmaceutical manufacturer Merck is on the hook to pay $473 million to the IRS for taxes owed by its newest acquisition, Schering-Plough.

 

Following an audit in 2004, IRS officials determined that Schering-Plough, manufacturer of such drugs as Claritin and Vytorin and sunscreens Coppertone and Bain de Soleil, was responsible for paying taxes on funds it received as the result of two interest-rate swap transactions. Company lawyers argued the transactions weren’t taxable, and sued the IRS in federal court, claiming it was being treated unfairly by the government because other companies that had done the same thing weren’t being taxed.

 

U.S. District Judge Katharine Hayden rejected this argument, and on appeal, the company lost its case again before the Third Circuit Court of Appeals.

 

Merck purchased Schering-Plough for $51 billion in November 2009.

-Noel Brinkerhoff

 

Merck Can't Dodge Tax Penalty of $473 Million (by Chris Fry, Courthouse News Service)

Merck Can’t Recoup $473 Million in U.S. Taxes, Court Rules (by Chris Dolmetsch and David Voreacos, Bloomberg)

Merck v. United States (Third Circuit Court of Appeals) (pdf)

Big Corporations Claim a Tax Holiday on Foreign Earnings Would Create Jobs…Don’t Believe It (by David Wallechinsky. AllGov)