DEPARTMENT OF THE TREASURY INTERNAL REVENUE SERVICE
FORM 906 (Rev. March 2023)
CLOSING AGREEMENT ON FINAL DETERMINATION COVERING SPECIFIC MATTERS
Under Section 7121 of the Internal Revenue Code of 1986, as amended OMB Control No. 1545-0089
Date of Execution: March 29, 2024
This Closing Agreement is entered into between the taxpayer identified below and the Commissioner of Internal Revenue (the "Commissioner"), acting through the Commissioner's duly authorized representative, pursuant to the authority granted under Section 7121 of the Internal Revenue Code of 1986, as amended (the "Code" or "IRC"), and the regulations promulgated thereunder. This agreement is final and conclusive as to the specific matters covered herein, and, except upon a showing of fraud, malfeasance, or misrepresentation of a material fact, the matters agreed to herein shall not be reopened or modified by either party.
PART I — IDENTIFICATION OF TAXPAYER
Section 1.1 — Taxpayer Information
The taxpayer that is a party to this Closing Agreement is identified as follows:
Full Legal Name: Penterra Pharmaceuticals Corp.
Employer Identification Number (EIN): 22-3741856
Principal Place of Business and Mailing Address:
2200 Independence Boulevard Princeton Junction, New Jersey 08550
State of Incorporation: Delaware
Stock Exchange Listing: The common stock of Penterra Pharmaceuticals Corp. is listed on the Nasdaq Stock Market under the ticker symbol "PPCA." As a publicly traded corporation, the taxpayer is subject to periodic reporting requirements under the Securities Exchange Act of 1934, as amended.
Fiscal Year-End: December 31 (calendar year taxpayer)
Federal Income Tax Returns at Issue: The federal income tax returns that are the subject of this Closing Agreement are the following United States Corporation Income Tax Returns (Forms 1120) filed by the taxpayer for the taxable years ending:
(a) December 31, 2017;
(b) December 31, 2018;
(c) December 31, 2019; and
(d) December 31, 2020.
All such returns were timely filed with the Internal Revenue Service.
Section 1.2 — Authorized Representative of the Taxpayer
The taxpayer is represented in the execution of this Closing Agreement by the following duly authorized officer:
Name: Marcus Whitfield
Title: Vice President, Global Tax
Authority: Mr. Whitfield is a duly authorized officer of Penterra Pharmaceuticals Corp. and has been vested with full authority, by resolution of the Board of Directors of Penterra Pharmaceuticals Corp. adopted on June 1, 2022, to execute this Closing Agreement and any and all ancillary documents on behalf of the taxpayer in connection with the examination described herein.
Address:
2200 Independence Boulevard Princeton Junction, New Jersey 08550
Section 1.3 — Representative of the Commissioner
The Commissioner of Internal Revenue is represented in the execution of this Closing Agreement by the following duly authorized official:
Appeals Officer: Noreen Castañeda, Appeals Officer, IRS Independent Office of Appeals
IRS Examination Team Reference: LB&I-NE-TP-2022-00641
The examination that gave rise to this Closing Agreement was originally conducted by the following members of the IRS Large Business & International Division ("LB&I"), Northeast Transfer Pricing Practice:
Supervisory Revenue Agent (Team Manager): Gerald Meskill
Lead Revenue Agent: Patricia Dunleavy
Following the issuance of the 30-Day Letter and the filing of a Formal Protest by the taxpayer, jurisdiction over the case was transferred from the LB&I examination team to the IRS Independent Office of Appeals, where the case was assigned to Appeals Officer Noreen Castañeda.
Section 1.4 — Taxpayer's Authorized Legal Representatives
Throughout the examination and Appeals proceedings, the taxpayer has been represented by the following law firm, as authorized by IRS Form 2848 (Power of Attorney and Declaration of Representative) filed with the Internal Revenue Service on June 8, 2022:
Firm: Calderwood & Harkness LLP
Office Addresses:
600 Lexington Avenue New York, New York 10022
1735 Market Street, Suite 3100 Philadelphia, Pennsylvania 19103
Authorized Representatives:
Leonard Cross — Responsible Partner
Sylvia Hartwell — Billing Partner
Garrett Simmons — Lead Associate
Leila Nazari — Working Associate
Matter Number: 1018-00009
All communications during the examination and Appeals proceedings were directed to and through the above-named representatives in accordance with the executed Form 2848.
PART II — RECITALS AND BACKGROUND
The following recitals set forth the background and procedural history relevant to this Closing Agreement. These recitals are incorporated into and form a part of this agreement.
Section 2.1 — Examination History
On May 16, 2022, the Internal Revenue Service opened an examination of the federal income tax returns (Forms 1120) of Penterra Pharmaceuticals Corp. for the taxable years ending December 31, 2017, December 31, 2018, December 31, 2019, and December 31, 2020. The examination was initiated by issuance of Letter 2205-A (Notification of Examination) addressed to the taxpayer at its principal place of business.
The examination was conducted by the IRS Large Business & International Division, Northeast Transfer Pricing Practice, under Exam Team ID LB&I-NE-TP-2022-00641. The examination team was led by Supervisory Revenue Agent Gerald Meskill, serving as Team Manager, and Lead Revenue Agent Patricia Dunleavy.
During the course of the examination, a total of forty-seven (47) Information Document Requests ("IDRs") were issued to the taxpayer between June 2022 and September 2023. The taxpayer responded to all IDRs in a timely and cooperative manner, producing documents, data, and analyses as requested by the examination team.
The examination focused principally on the transfer pricing methodology employed by the taxpayer in connection with intercompany transactions between Penterra Pharmaceuticals Corp. (the United States parent corporation) and its indirect wholly-owned subsidiary, Penterra Biopharma International DAC ("PBI"). PBI is a Designated Activity Company organized under the laws of Ireland, with its registered office located at 4th Floor, Claremont House, Sandyford Business Park, Dublin D18 K7T4, Ireland. PBI's Irish Tax Reference Number is 3218764T.
PBI is owned one hundred percent (100%) by Penterra Holdings Luxembourg S.à r.l. ("PHL"), a société à responsabilité limitée organized under the laws of the Grand Duchy of Luxembourg, with its registered office at 14, rue Aldringen, L-1118 Luxembourg, and registered with the Luxembourg Registre de Commerce et des Sociétés under RCS Number B 168452. PHL is itself owned one hundred percent (100%) by the taxpayer, Penterra Pharmaceuticals Corp. For United States federal income tax purposes, PHL has elected to be, and is treated as, a disregarded entity pursuant to Treasury Regulations § 301.7701-3, such that PBI is treated as a direct subsidiary of the taxpayer for purposes of the transfer pricing rules of IRC § 482 and the regulations thereunder.
Section 2.2 — Intercompany Arrangements at Issue
The examination identified and focused upon the following intercompany arrangements between the taxpayer and PBI:
(a) Qualified Cost-Sharing Arrangement. The taxpayer and PBI entered into a Qualified Cost-Sharing Arrangement ("CSA"), effective July 1, 2012, pursuant to Treasury Regulations § 1.482-7. Under the terms of the CSA, PBI acquired the right to develop and exploit certain pharmaceutical intellectual property outside of the Americas (defined in the CSA as North America, Central America, South America, and the Caribbean) in exchange for the following consideration:
(i) A platform contribution transaction ("PCT") payment in the amount of Three Hundred Twelve Million Dollars ($312,000,000), which was paid by PBI to the taxpayer in the taxable year ending December 31, 2012; and
(ii) Ongoing cost-sharing payments, allocated between the taxpayer and PBI on a periodic basis in proportion to reasonably anticipated benefits ("RAB"), as required by Treasury Regulations § 1.482-7(d)(1).
The CSA governed the sharing of qualified research and development costs incurred in connection with the development of pharmaceutical compounds and related intangible property for the taxable years at issue.
(b) Intercompany License Agreement for Legacy Compounds. In addition to the CSA, the taxpayer and PBI entered into an intercompany license agreement governing the use and exploitation of legacy pharmaceutical compounds — that is, compounds whose development was substantially completed prior to July 1, 2012 and which were therefore not covered by the CSA. Under this license agreement, PBI was granted a non-exclusive license to use, manufacture (or have manufactured), market, distribute, and sell the legacy compounds in the non-Americas territory. In consideration for this license, PBI paid the taxpayer arm's-length royalties calculated at a rate of four and one-half percent (4.5%) of net sales of the licensed legacy compounds in the non-Americas territory.
Section 2.3 — Notice of Proposed Adjustment
On October 12, 2023, following the completion of its analysis, the IRS examination team issued a Notice of Proposed Adjustment ("NOPA") for all four taxable years at issue. The NOPA proposed the following adjustments to the taxpayer's taxable income under IRC § 482:
(a) CSA Cost-Sharing Ratio Adjustments. The examination team proposed an increase in PBI's cost-sharing percentage under the CSA, which would result in additional income allocable to the taxpayer. Specifically, the examination team contended that PBI's share of reasonably anticipated benefits — and therefore its required cost-sharing contribution — was understated by the taxpayer. The proposed adjustments were as follows:
(b) Royalty Rate Adjustments. The examination team also proposed an increase in the royalty rate applicable to the intercompany license of legacy intellectual property from the taxpayer to PBI, from the reported rate of 4.5% of non-Americas net sales to a proposed rate of 11.0% of non-Americas net sales. The examination team asserted that comparable uncontrolled transactions and other transfer pricing methods supported a higher arm's-length royalty rate. The proposed adjustments were as follows:
(c) Correlative Offset. The IRS allowed a correlative offset in the amount of ($42,650,000) across all four taxable years to prevent double-counting of income attributable to the overlap between the CSA cost-sharing adjustments and the royalty rate adjustments.
(d) Net Proposed Adjustment. The net proposed adjustment across all four taxable years, after application of the correlative offset, was as follows:
CSA Cost-Sharing Adjustments: $235,010,000
Royalty Rate Adjustments: $188,040,000
Less: Correlative Offset: ($42,650,000)
Net Proposed Adjustment (All Years): $380,400,000
(e) Penalty. In addition to the proposed income adjustments, the IRS proposed a substantial valuation misstatement penalty under IRC § 6662(e) at a rate of twenty percent (20%) of the underpayment of tax attributable to the IRC § 482 allocation. The proposed penalty was calculated as follows:
Net Proposed Adjustment: $380,400,000
Applicable Corporate Tax Rate: 21%
Estimated Underpayment: $380,400,000 × 21% = $79,884,000
Penalty (20% of Underpayment): $79,884,000 × 20% = $15,976,800 (approximately $15,977,000, rounded to approximately $15,980,000 in the NOPA)
Section 2.4 — 30-Day Letter and Formal Protest
Following the issuance of the NOPA, a 30-Day Letter was issued by the IRS to the taxpayer on November 8, 2023, advising the taxpayer of its right to file a written protest and to request a conference with the IRS Independent Office of Appeals.
The taxpayer, through its authorized legal representatives at Calderwood & Harkness LLP, filed a timely Formal Protest on December 22, 2023. The Formal Protest contested all proposed adjustments to taxable income under IRC § 482, as well as the proposed IRC § 6662(e) substantial valuation misstatement penalty. The Formal Protest set forth detailed legal and factual arguments, supported by economic analyses and expert reports, challenging the examination team's proposed transfer pricing adjustments on multiple grounds, including the appropriate selection and application of the best method under Treasury Regulations § 1.482-1(c), the proper measurement of reasonably anticipated benefits under the CSA, and the identification and analysis of comparable uncontrolled transactions for purposes of the royalty rate determination.
Following the filing of the Formal Protest, jurisdiction over the case was transferred from the LB&I examination team to the IRS Independent Office of Appeals. The case was assigned to Appeals Officer Noreen Castañeda in January 2024.
Section 2.5 — Appeals Conference and Settlement
An Appeals conference was held in person at the IRS Independent Office of Appeals, Manhattan office, on February 28, 2024. The following individuals attended the Appeals conference:
On behalf of the Taxpayer:
Leonard Cross, Esq. — Calderwood & Harkness LLP (Responsible Partner)
Sylvia Hartwell, Esq. — Calderwood & Harkness LLP (Billing Partner)
Garrett Simmons, Esq. — Calderwood & Harkness LLP (Lead Associate)
Marcus Whitfield — Penterra Pharmaceuticals Corp. (Vice President, Global Tax)
Deborah Staines — Penterra Pharmaceuticals Corp. (Senior Director, Transfer Pricing)
Dr. Helena Vasquez — Whitmore Valuation Group LLC (Independent Transfer Pricing Expert)
On behalf of the Commissioner:
Noreen Castañeda — Appeals Officer, IRS Independent Office of Appeals
During the Appeals conference, the parties discussed the merits of each proposed adjustment and the associated penalty in detail. The taxpayer's representatives presented economic analyses and expert testimony from Dr. Helena Vasquez of Whitmore Valuation Group LLC, addressing the comparability analyses, the application of the residual profit split method to the CSA cost-sharing ratios, and the application of the comparable uncontrolled transaction method to the legacy IP royalty rate.
Following the Appeals conference, the taxpayer submitted supplemental written materials to Appeals Officer Castañeda on March 5, 2024, and March 11, 2024, providing additional data and analyses as requested by the Appeals Officer during the conference.
After considering the totality of the record, including the hazards of litigation and the merits of the respective positions of the parties, Appeals Officer Castañeda issued a formal settlement offer to the taxpayer on March 15, 2024.
The taxpayer, through its authorized representative Marcus Whitfield, accepted the settlement offer on March 22, 2024, and authorized Calderwood & Harkness LLP to communicate the taxpayer's acceptance to the IRS Independent Office of Appeals.
This Closing Agreement memorializes the terms of the settlement agreed upon by the parties.
PART III — TERMS OF AGREEMENT AND DETERMINATION OF TAX LIABILITY
NOW, THEREFORE, in consideration of the foregoing recitals and the mutual agreements set forth herein, and pursuant to the authority granted under IRC § 7121, the taxpayer and the Commissioner agree to the following terms:
Section 3.1 — Agreed Adjustments to Taxable Income
The parties agree that the taxable income of Penterra Pharmaceuticals Corp. (EIN: 22-3741856), as reported on its Forms 1120 for the taxable years specified below, shall be increased by the following amounts. These amounts represent the agreed adjustments under IRC § 482 to the intercompany transfer pricing between Penterra Pharmaceuticals Corp. and Penterra Biopharma International DAC with respect to both the Qualified Cost-Sharing Arrangement and the intercompany license agreement for legacy compounds:
The total agreed adjustment of Forty-Seven Million Six Hundred Thousand Dollars ($47,600,000) represents approximately 12.51% of the originally proposed net adjustment of Three Hundred Eighty Million Four Hundred Thousand Dollars ($380,400,000).
These agreed adjustments reflect a compromise of the positions of the Commissioner and the taxpayer with respect to both the CSA cost-sharing ratio issue and the legacy intellectual property royalty rate issue. The agreed adjustments incorporate and include the effect of any applicable correlative offsets to prevent double-counting of income between the two categories of proposed adjustments. The parties agree that no further allocation, segregation, or attribution of the agreed adjustments to one category or the other is necessary or intended for purposes of this agreement.
Section 3.2 — Applicable Tax Rates and Additional Tax Due
The agreed adjustments to taxable income result in the following additional federal income tax liabilities for each taxable year:
The total additional federal income tax due under this agreement is Ten Million Dollars ($10,000,000). This amount is computed as the sum of the additional tax for each taxable year. For the taxable year ending December 31, 2017, the applicable corporate tax rate reflects the blended rate resulting from the enactment of the Tax Cuts and Jobs Act of 2017 (Pub. L. No. 115-97), which reduced the corporate income tax rate from 35% to 21% effective January 1, 2018. Because Penterra Pharmaceuticals Corp. is a calendar-year taxpayer, the 2017 taxable year is subject to the pre-Tax Cuts and Jobs Act rate of 35%. For the taxable years ending December 31, 2018, December 31, 2019, and December 31, 2020, the applicable corporate income tax rate is 21%. The total additional tax of $10,000,000 reflects the aggregate of the year-by-year computations as shown above, with such minor rounding adjustments as are reflected in the total.
The taxpayer shall pay the total additional tax of Ten Million Dollars ($10,000,000) to the Internal Revenue Service within sixty (60) days of the date of execution of this Closing Agreement, or upon assessment, whichever is earlier. Payment shall be made by electronic funds transfer to the United States Treasury, referencing EIN 22-3741856 and the applicable taxable years.
Section 3.3 — Interest
Interest on the additional tax determined under this Closing Agreement shall be computed at the applicable federal underpayment rate as prescribed by IRC § 6621(a)(2), compounded daily pursuant to IRC § 6622, from the respective original due date of each taxable year's federal income tax return (without regard to extensions) through the date on which payment of the additional tax is received by the Internal Revenue Service.
Based upon current interest rate projections and the anticipated date of payment, the estimated total interest liability across all four taxable years is approximately Two Million Eight Hundred Forty Thousand Dollars ($2,840,000). This estimate is subject to final computation by the Internal Revenue Service upon receipt of payment and may vary depending on the actual date of payment. The taxpayer acknowledges its obligation to pay interest as finally computed by the IRS, and the IRS will provide the taxpayer with a final computation of interest due upon processing of this Closing Agreement.
Section 3.4 — Penalties
The IRC § 6662(e) substantial valuation misstatement penalty in the amount of Fifteen Million Nine Hundred Seventy-Seven Thousand Dollars ($15,977,000) (approximately $15,980,000), as originally proposed by the Commissioner in the Notice of Proposed Adjustment dated October 12, 2023, is hereby fully abated and shall not be asserted or assessed against the taxpayer for any of the taxable years at issue.
The Commissioner accepts and acknowledges that the taxpayer has established a reasonable cause defense under IRC § 6664(c) with respect to the transfer pricing positions reported on its federal income tax returns for the taxable years ending December 31, 2017 through December 31, 2020. Specifically, the Commissioner accepts that the taxpayer maintained contemporaneous transfer pricing documentation that satisfies the requirements of IRC § 6662(e)(3)(B) and Treasury Regulations § 1.6662-6 for all taxable years at issue, and that the taxpayer acted with reasonable cause and in good faith in determining its transfer pricing positions.
No other penalties are asserted or agreed to by the parties under this Closing Agreement. The Commissioner will not assert any accuracy-related penalty under IRC § 6662(a), any negligence penalty under IRC § 6662(b)(1), any substantial understatement penalty under IRC § 6662(b)(2), or any other penalty provision of the Code with respect to the agreed adjustments for the taxable years covered by this agreement.
Section 3.5 — Summary of Total Cash Liability
The total cash liability of the taxpayer under this Closing Agreement is summarized as follows:
Additional Federal Income Tax: $10,000,000
Estimated Interest (IRC § 6621): $2,840,000
Penalties: $0
Total Estimated Liability: $12,840,000
The total estimated liability of approximately Twelve Million Eight Hundred Forty Thousand Dollars ($12,840,000) is subject to adjustment based upon the final computation of interest by the Internal Revenue Service.
PART IV — SPECIFIC MATTERS COVERED BY THIS CLOSING AGREEMENT
Section 4.1 — Scope of Agreement
This Closing Agreement covers, and is final and conclusive with respect to, the following specific matters for the taxable years ending December 31, 2017, December 31, 2018, December 31, 2019, and December 31, 2020:
(a) The arm's-length nature of the cost-sharing percentages applied by the taxpayer under the Qualified Cost-Sharing Arrangement between Penterra Pharmaceuticals Corp. and Penterra Biopharma International DAC, including the allocation of reasonably anticipated benefits and the determination of each party's share of intangible development costs under Treasury Regulations § 1.482-7;
(b) The arm's-length royalty rate applicable to the intercompany license of legacy intellectual property (pre-July 1, 2012 vintage compounds) from Penterra Pharmaceuticals Corp. to Penterra Biopharma International DAC, as evaluated under the transfer pricing methods set forth in Treasury Regulations §§ 1.482-1 through 1.482-4;
(c) The determination regarding the IRC § 6662(e) substantial valuation misstatement penalty related to the foregoing transfer pricing positions, including the taxpayer's reasonable cause defense under IRC § 6664(c); and
(d) The correlative adjustments applicable to prevent double-counting of income between the CSA cost-sharing adjustments and the legacy intellectual property royalty rate adjustments.
Section 4.2 — Matters Not Covered
This Closing Agreement does not cover, and is not final or conclusive with respect to, the following matters:
(a) Future Taxable Years. This agreement does not constitute an advance pricing agreement ("APA") within the meaning of Revenue Procedure 2015-41 (or any successor guidance) and does not bind either the Commissioner or the taxpayer with respect to any taxable year other than the taxable years ending December 31, 2017, December 31, 2018, December 31, 2019, and December 31, 2020. The Commissioner retains full authority to examine the taxpayer's transfer pricing for any taxable year not covered by this agreement, and the taxpayer retains full authority to adopt and apply any transfer pricing methodology that it determines to be appropriate for any such year, in each case subject to the provisions of IRC § 482 and the regulations thereunder.
(b) Platform Contribution Transaction. This agreement does not address the Platform Contribution Transaction ("PCT") payment of Three Hundred Twelve Million Dollars ($312,000,000) made by Penterra Biopharma International DAC to the taxpayer in the taxable year ending December 31, 2012, which was not within the scope of the examination years covered by Exam Team ID LB&I-NE-TP-2022-00641. Neither the amount, the arm's-length nature, nor the tax treatment of the PCT payment is determined or affected by this agreement.
(c) State and Local Tax Consequences. This agreement does not address, determine, or affect any state or local income tax, franchise tax, or other tax consequences that may arise from or be related to the federal income tax adjustments agreed to herein. The taxpayer acknowledges that the agreed federal adjustments may have state and local tax implications and that this agreement does not limit or preclude any state or local taxing authority from making adjustments based upon the federal adjustments reflected herein.
(d) Competent Authority Relief. This agreement does not preclude the taxpayer from initiating a request for competent authority assistance under Article 25 (Mutual Agreement Procedure) of the Convention between the Government of the United States of America and the Government of Ireland for the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and Capital Gains (the "U.S.-Ireland Income Tax Treaty"), with respect to any double taxation of income that may result from the adjustments agreed to herein. The taxpayer retains the right to seek relief from double taxation through the competent authority process, and the Commissioner agrees to cooperate in any such process in accordance with applicable law and treaty obligations.
Section 4.3 — No Precedential Effect
This Closing Agreement is entered into solely to resolve the specific matters covered herein for the taxable years specified. The terms and adjustments agreed to herein do not constitute a concession by either party of any legal position or factual determination, and this agreement shall not be cited, referenced, or relied upon by either party as precedent or authority in any other proceeding, examination, or matter, whether involving the taxpayer, any related entity, or any other taxpayer.
The settlement reflected in this agreement was reached based upon a consideration of the hazards of litigation, the merits of the respective positions of the parties, and the interests of sound and efficient tax administration. Nothing in this agreement shall be construed as an admission by either party regarding the correctness or incorrectness of any position taken during the examination or Appeals proceedings.
PART V — REPRESENTATIONS AND WARRANTIES
Section 5.1 — Taxpayer Representations
The taxpayer, Penterra Pharmaceuticals Corp., represents and warrants as follows:
(a) All information provided by the taxpayer to the Internal Revenue Service during the course of the examination, including but not limited to responses to forty-seven (47) Information Document Requests, financial data, transfer pricing analyses, intercompany agreements, and other documentation, was complete and accurate to the best of the taxpayer's knowledge and belief as of the dates on which such information was provided.
(b) Marcus Whitfield, Vice President, Global Tax, is a duly authorized officer of Penterra Pharmaceuticals Corp. and has been authorized by the Board of Directors of Penterra Pharmaceuticals Corp. to execute this Closing Agreement on behalf of the taxpayer. A copy of the Board resolution authorizing Mr. Whitfield to execute this agreement has been made available to the Commissioner upon request.
(c) The taxpayer's Forms 1120 for the taxable years ending December 31, 2017, December 31, 2018, December 31, 2019, and December 31, 2020 were prepared by Crestfield & Associates LLP, an independent certified public accounting firm serving as the taxpayer's auditor and tax return preparer, under the supervision of engagement partner Martin Ogilvy, CPA. The taxpayer has relied upon the advice and expertise of Crestfield & Associates LLP in preparing its federal income tax returns and in determining its transfer pricing positions for the taxable years at issue.
(d) The taxpayer has not engaged in any fraud, malfeasance, or misrepresentation of a material fact in connection with the examination, Appeals proceedings, or the negotiation and execution of this Closing Agreement.
Section 5.2 — Commissioner Representations
The Commissioner, through Appeals Officer Noreen Castañeda, represents as follows:
(a) The settlement reflected in this Closing Agreement is based upon Appeals Officer Castañeda's independent consideration of the hazards of litigation and the relative merits of the respective positions of the Commissioner and the taxpayer with respect to each of the issues resolved herein.
(b) Appeals Officer Castañeda is duly authorized to execute this Closing Agreement on behalf of the Commissioner of Internal Revenue, pursuant to Delegation Order 8-3 (or its successor) and applicable IRS procedures.
(c) The terms of this Closing Agreement are consistent with applicable law and with the policies and procedures of the IRS Independent Office of Appeals.
PART VI — STATUTE OF LIMITATIONS
Section 6.1 — Effect on Assessment Period
The parties acknowledge the following with respect to the statute of limitations for assessment of federal income tax:
(a) Consents to extend the period of limitations on assessment of federal income tax (IRS Forms 872 — Consent to Extend the Time to Assess Tax) were executed by the taxpayer and the Commissioner for the taxable years ending December 31, 2017 and December 31, 2018. These consents extend the period within which the Commissioner may assess additional tax for those taxable years through December 31, 2024.
(b) For the taxable years ending December 31, 2019 and December 31, 2020, the original three-year period of limitations under IRC § 6501(a) had not expired at the time the NOPA was issued and remains open as of the date of execution of this Closing Agreement.
(c) The assessment of additional federal income tax and interest as determined under this Closing Agreement shall be made within the periods prescribed by law, as extended by agreement of the parties, and in accordance with IRC § 7121(b).
The taxpayer agrees to cooperate with the Internal Revenue Service in effecting the timely assessment of additional tax and interest in accordance with the terms of this Closing Agreement.
PART VII — FINALITY AND EFFECT
Section 7.1 — Binding Effect
This Closing Agreement, upon execution by both the taxpayer and the duly authorized representative of the Commissioner, is final and conclusive as to the specific matters covered herein, and is binding upon the taxpayer, the Commissioner of Internal Revenue, and their respective successors, in accordance with IRC § 7121.
Except upon a showing of fraud or malfeasance, or misrepresentation of a material fact, neither the taxpayer nor the Commissioner may reopen, modify, set aside, or otherwise disturb the specific matters determined under this Closing Agreement. This agreement shall remain in full force and effect regardless of any subsequent change in law, regulation, or administrative interpretation, to the extent that such change applies to the taxable years covered herein.
This Closing Agreement is entered into in reliance upon the representations and warranties set forth in Part V above and upon the completeness and accuracy of the information provided by the taxpayer during the examination and Appeals proceedings.
Section 7.2 — Examination Closure
Upon execution of this Closing Agreement by both parties, the examination of Penterra Pharmaceuticals Corp. (EIN: 22-3741856) for the taxable years ending December 31, 2017, December 31, 2018, December 31, 2019, and December 31, 2020, conducted under Exam Team ID LB&I-NE-TP-2022-00641, is hereby closed with respect to all matters covered by this agreement.
The IRS shall issue appropriate closing letters or other communications to the taxpayer and its authorized representatives confirming the closure of the examination in accordance with standard IRS procedures.
PART VIII — EXECUTION
IN WITNESS WHEREOF, the undersigned have executed this Closing Agreement as of the date set forth below, each representing that he or she has the full power and authority to bind the party on whose behalf he or she signs.
Section 8.1 — Taxpayer
PENTERRA PHARMACEUTICALS CORP. (EIN: 22-3741856)
By: ________
Name: Marcus Whitfield
Title: Vice President, Global Tax
Date: March 29, 2024
Section 8.2 — Commissioner's Representative
COMMISSIONER OF INTERNAL REVENUE
By: ________
Name: Noreen Castañeda
Title: Appeals Officer, IRS Independent Office of Appeals
Date: March 29, 2024
Section 8.3 — Approving Official
REVIEWED AND APPROVED:
By: ________
Name: ________
Title: Appeals Team Manager / Area Director, IRS Independent Office of Appeals
Date: March 29, 2024
ATTACHMENT A
SCHEDULE OF ADJUSTMENTS BY TAXABLE YEAR
The following schedule sets forth, for each taxable year covered by the Closing Agreement, the agreed adjustments to taxable income, the corrected taxable income, the additional federal income tax, the penalty determination, and the interest computation methodology:
Notes to Attachment A:
1. Interest shall be computed at the applicable federal underpayment rate under IRC § 6621(a)(2), compounded daily pursuant to IRC § 6622, from the original due date of each taxable year's return (March 15, 2018 for TY 2017; April 15, 2019 for TY 2018; July 15, 2020 for TY 2019, as extended under Notice 2020-23; April 15, 2021 for TY 2020) through the date of payment.
2. The additional tax for TY 2017 reflects the statutory corporate income tax rate of 35% in effect for taxable years beginning before January 1, 2018.
3. The IRC § 6662(e) substantial valuation misstatement penalty has been fully abated for all taxable years, as set forth in Section 3.4 of the Closing Agreement.
4. The estimated total interest of $2,840,000 is subject to final computation by the IRS upon receipt of payment.
ATTACHMENT B
IDENTIFICATION OF RELATED ENTITIES
The following entities are related to the taxpayer and are relevant to the intercompany transactions covered by this Closing Agreement:
1. Penterra Biopharma International DAC
Entity Type: Designated Activity Company organized under the laws of Ireland