The IRS is scrutinizing how UnitedHealth moved money through foreign subsidiaries—and whether it underpaid taxes

UnitedHealth Group is challenging an IRS proposal to increase its taxable income from the pricing it used for transactions with a foreign subsidiary between 2017 and 2020. The dispute, disclosed in May and reiterated in August, covers transactions from those tax years and could result in the IRS "significantly increasing taxable income" for each year.

UnitedHealth asserts its tax positions are well-supported and plans to contest the IRS's adjustments. The IRS has been increasingly scrutinizing transfer pricing by American multinational corporations since the Obama administration, aiming to ensure profits are not shifted out of the U.S. to foreign subsidiaries. Similar disputes have been waged with companies like Coca-Cola, Meta, and Medtronic, with outcomes varying from billions of dollars in tax adjustments to settlements.

Transfer pricing refers to the prices set for transactions between a company's own units in different countries, affecting the attributed profit in each country and the corresponding taxes paid. Section 482 of the tax code allows the IRS to adjust taxable income if a company is deemed to have set prices unfairly. While the specific transaction triggering the IRS's proposed adjustment remains undisclosed, similar transfer pricing disputes can involve billions of dollars and take years to resolve.

UnitedHealth's dispute remains unresolved, and the company, like other companies involved, is exploring administrative and potentially legal avenues for resolution.