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On February 14, 2024, the NAM filed an amicus brief urging the 8th Circuit to reverse the IRS’s increase of a manufacturer’s taxable income by more than $23 million. In this case, 3M v. Commissioner, 3M licensed certain intellectual property to a Brazilian subsidiary who was barred by Brazilian law from paying 3M the arms-length price for use of the IP. The Tax Court erroneously endorsed the IRS’s view that it could increase the company’s taxable income to reflect a hypothetical arms-length transaction even though foreign law precluded the company from receiving the arms-length price in the transaction.

We argue in our brief that the IRS’s actions contradict controlling precedent and that allowing the IRS to increase 3M’s revenue would upend the public’s settled expectations upon which businesses rely to make investment decisions. We will also argue that the 8th Circuit should not allow the IRS to flout its Administrative Procedure Act obligations by relying on a rule for its actions that did not go through the notice and comment process.