Bayer Corporation and Subsidiaries v. United States, Civil No. 09-351 (W.D. Pa. 2012)

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Background

Bayer Corporation v. United States Civil No. 09-351

This is in regards to a denial of federal research tax credits from Bayer Corporation and Subsidiaries for 1990-2006.  Bayer presents an Amended Motion based on statistical sampling.

Basic Facts

Qualified Research Expenses (QREs) were established in 1981 to increase productivity.  Bayer Corporation and Subsidiaries employ more than 20,000 employees and have several divisions in its company including healthcare, material science and crop science. Bayer conducts research in the US as well as the United Kingdom, Singapore, Germany and several other countries.  Bayer calculates its QREs through accounting records consisting of Word documents, Excel files, patent applications and substantiates QREs for the purpose of claiming tax credits through evidence provided by former and current employees who performed the research.  After completing the Deloitte study in 1998, Bayer filed a claim for additional QRE credits and the IRS denied this claim and also denied credits for QREs that they had previously agreed upon.

The parties’ Joint Motion for a Hearing on Bayer’s amended Sampling motion was granted and a hearing held in 2011, which would seek clarification in regards to the QREs discussed above.

Bayer spent over 13,000 hours devoted to retrieving documents and evidence pertaining to this case as well as offering testimony and documentation.  The government states that Bayer has not met its burden of identifying business components for which the QREs are claimed and therefor cannot quantify the amount of QRE credits that Bayer is entitled to.

Bayer acknowledges that sampling may have been used in tax cases however the references used in the past have all been rejected.

Court’s Decision

The Court is not persuaded by Bayer’s arguments that denial of the Amended Sampling Motion would create a credit for the QREs they were claiming for the purpose of research credit. In addition, Bayer’s argument regarding bookkeeping and evidence requirements should be directed to the Legislative Branch, not this Court.

Click Here to view the full case: Bayer Corporation and Subsidiaries v. United States, Civil No. 09-351 (W.D. Pa. 2012).

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