U.S. Court Tightens Transfer Pricing Rules in 3M Intangibles Case

October 1, 2025

The U.S. Court of Appeals revisited disputes over the valuation of intangible property transferred to foreign affiliates under a cost-sharing arrangement. The IRS contended that 3M understated the value of its intangibles, failing to meet the “commensurate with income” standard of IRC Section 482.

The Court upheld the IRS’s income-based valuation, recognizing the use of post-transaction profit evidence to test arm’s length results.

By endorsing the IRS’s approach, the Court affirmed that transfer pricing must reflect actual economic outcomes rather than contractual intent.

The decision strengthens a substance-over-form standard in U.S. transfer pricing, reinforcing the IRS’s authority to adjust pricing where profit allocations misalign with economic contributions.

Find the full English translation here: US vs 3M Company and Subsidiaries, October 2025, U.S. Court of Appeal, Opinion No 23-3772 - TPcases