IRS Scrutinizes UnitedHealth's Foreign Subsidiary Tax Practices

UnitedHealth Group is actively contesting a proposal from the Internal Revenue Service (IRS) that aims to substantially increase the company's taxable income. This dispute centers on how UnitedHealth priced transactions with one of its foreign subsidiaries, a matter first disclosed in a quarterly filing in May and reiterated in an August filing. The IRS's notices specifically cover transactions that occurred between UnitedHealth and this unnamed foreign subsidiary during the tax years spanning 2017 through 2020. According to the May filing, the agency is seeking to "significantly increase taxable income" for each of these years and may pursue similar adjustments for subsequent tax periods. UnitedHealth, however, is not accepting the IRS's assessment. In its August filing, the company stated its belief that its tax positions are adequately supported and announced its intention to "vigorously contest" the IRS's proposed adjustments. This scrutiny from the IRS is part of a broader, long-standing initiative that commenced over a decade ago. This initiative targets how large American multinational corporations allocate their profits between their domestic U.S. operations and their overseas subsidiaries. Reuven S. Avi-Yonah, the Irwin I. Cohn Professor of Law at the University of Michigan Law School, explained to Fortune that such transfer pricing disputes are common, as the IRS has intensified its examination of U.S.-based multinationals attempting to shift profits out of the United States to their foreign entities since the Obama administration. The IRS has engaged in similar tax disputes with other major corporations, including Coca-Cola, Meta, and Medtronic, with varying resolutions. Avi-Yonah noted that these cases have resulted in both wins and losses for the IRS, with the financial stakes typically amounting to billions of dollars. A spokesperson for UnitedHealth Group confirmed to Fortune that the company had previously disclosed the IRS examination and related tax matters in its public filings. The spokesperson reiterated the company's stance that its tax positions are properly supported and indicated that these matters "remain subject to further review and discussions." Neither the company's filings nor the spokesperson identified the specific foreign subsidiary involved in the dispute or its geographical location.