In its most recent annual report, Microchip Technology (MCHP), a maker of semiconductor products for embedded control applications, disclosed it had received a Statutory Notice of Deficiency from the IRS for fiscal year 2007 through fiscal year 2012. The disputed amounts relate primarily to transfer pricing.

Though the company is challenging the IRS’s assessment and says it has adequate reserves for tax matters, Microchip Technology acknowledges that if the IRS prevails on all of its assertions the tax, penalties, and interest could be material.

Unlike others, Microchip Technologies is not disclosing how much money the IRS wants. Over the past two years we’ve documented an IRS transfer pricing crackdown which has resulted in the following disclosures:

—Facebook expects a $9.7 billion transfer pricing tax bill
—Coca-Cola is fighting a $13 billion transfer pricing tax bill
—Edwards Lifesciences is disputing a $180 million transfer pricing tax bill
—Cirrus Logic is challenging a $170.5 million transfer pricing bill

Two years ago, the IRS dropped a not so subtle hint that increased transfer pricing scrutiny was on the horizon. In April 2020, the IRS issued guidance outlining best practices and common mistakes in preparing transfer pricing documentation.