CALDERWOOD & HARKNESS LLP Attorneys at Law
1735 Market Street, Suite 3100 Philadelphia, PA 19103
Telephone: (215) 564-8200 Facsimile: (215) 564-8201 www.calderwoodharkness.com
September 20, 2022
Matter No.: 1018-00009
Via Hand Delivery and Email
Revenue Agent Patricia Dunleavy Lead Revenue Agent Internal Revenue Service Large Business & International Division 600 Arch Street, Room 6224 Philadelphia, PA 19106
Re: Penterra Pharmaceuticals Corp. (EIN: 22-3741856) — Examination of Federal Income Tax Returns for Tax Years 2017, 2018, 2019, and 2020; Exam Team ID: LB&I-NE-TP-2022-00641; Request for Extension of Time to Respond to Information Document Request No. 14
Dear Revenue Agent Dunleavy:
I write on behalf of Calderwood & Harkness LLP ("C&H"), as authorized representatives of Penterra Pharmaceuticals Corp. ("PPC"), pursuant to IRS Form 2848, Power of Attorney and Declaration of Representative, filed with the Internal Revenue Service on June 8, 2022. The Form 2848 designates Leonard Cross, Sylvia Hartwell, Garrett Simmons, and Leila Nazari of Calderwood & Harkness LLP as authorized representatives of PPC in connection with the above-referenced examination of PPC's federal income tax returns for tax years ending December 31, 2017, December 31, 2018, December 31, 2019, and December 31, 2020. The purpose of this letter is to respectfully request a thirty (30) calendar day extension of time to respond to Information Document Request No. 14 ("IDR No. 14"), issued in connection with the above-referenced examination.
Description of IDR No. 14
On September 6, 2022, the examination team issued IDR No. 14 to PPC. IDR No. 14 requests the production of documentation relating to intercompany service fee arrangements within the PPC consolidated group. Specifically, IDR No. 14 seeks all agreements, invoices, cost allocation methodologies, transfer pricing studies, supporting workpapers, and related documentation for services provided between PPC (the U.S. parent corporation) and its controlled foreign subsidiaries, including but not limited to Penterra Biopharma International DAC ("PBI"), an Irish designated activity company, and Penterra Manufacturing Ireland Ltd. ("PMI"), an Irish limited company. As we understand the scope of IDR No. 14, the request encompasses all intercompany management service agreements, shared-services arrangements, cost-sharing and cost-contribution agreements to the extent they relate to intercompany service charges, the allocation keys and methodologies employed by PPC's finance and tax departments in determining arm's-length service fees, and any contemporaneous documentation supporting the pricing of such services across all four tax years under examination (2017 through 2020).
The current response deadline for IDR No. 14 is October 5, 2022.
Basis for the Extension Request
PPC respectfully submits that a thirty-day extension is warranted for the following reasons:
Volume and Complexity of Responsive Materials. IDR No. 14 encompasses intercompany service fee arrangements spanning all four tax years under examination — a period of four fiscal years from January 1, 2017, through December 31, 2020. The PPC group's intercompany services structure involves multiple categories of services, including research and development support, regulatory affairs, global marketing, information technology, human resources, treasury and cash management, legal, and general and administrative functions. Each category of service is governed by its own contractual framework and utilizes distinct allocation methodologies. The responsive documentation for these arrangements across four tax years is voluminous, and a thorough, organized production requires substantial effort to compile, index, and review.
Coordination Across Multiple Entities and Jurisdictions. The responsive materials are maintained across several legal entities within the PPC group, each located in a different jurisdiction. In particular, relevant documents are held by the following entities:
• Penterra Pharmaceuticals Corp. (headquartered at 2200 Independence Boulevard, Princeton Junction, NJ 08550), which maintains certain master service agreements, corporate-level cost allocation studies, and centralized accounting records;
• Penterra Biopharma International DAC ("PBI") (4th Floor, Claremont House, Sandyford Business Park, Dublin D18 K7T4, Ireland), which holds local records of services received from PPC and invoices processed through PBI's accounts payable function;
• Penterra Manufacturing Ireland Ltd. ("PMI") (Unit 7, Ringaskiddy Industrial Estate, Co. Cork T12 PX29, Ireland), which maintains records of manufacturing support services, quality assurance services, and related cost allocations; and
• Penterra Holdings Luxembourg S.à r.l. ("PHL") (14, rue Aldringen, L-1118 Luxembourg), which holds records relating to holding company services and certain treasury and intercompany financing functions that intersect with the service fee arrangements at issue.
Assembling documents from these multiple entities requires coordination with personnel in the United States, Ireland, and Luxembourg, taking into account differing business hours, document management systems, and the time needed to retrieve records from both active systems and archived files.
International Advisor Coordination. In order to compile and review service fee documentation maintained in Ireland by PBI and PMI, we must coordinate with Thornbury & Keogh, PBI's and PMI's Irish tax advisors, located at 22 Fitzwilliam Square, Dublin 2, D02 YH68, Ireland. Thornbury & Keogh have been instrumental in maintaining the Irish-side transfer pricing documentation for the intercompany service fee arrangements and must be consulted to ensure that the materials produced are complete and consistent with the documentation maintained locally in Ireland. Given the time difference between Philadelphia and Dublin, as well as the need to schedule review sessions with the Thornbury & Keogh team, additional time is needed to effectuate this coordination in a thorough and efficient manner.
Privilege Review. Certain documents that may be responsive to IDR No. 14 require careful review for attorney-client privilege and work-product protection before production. PPC retained outside counsel — including C&H and other advisors — to provide legal advice in connection with the structuring and implementation of certain intercompany service fee arrangements during the tax years at issue. As a result, some of the responsive materials may be intermingled with, or may reflect, privileged legal advice. PPC intends to conduct this privilege review in a manner that is consistent with the privilege protocols established for this examination and to prepare a privilege log for any documents withheld on privilege grounds, if applicable. Completing this review responsibly within the current thirty-day response window is not practicable given the volume of materials involved.
Internal Coordination with PPC's Tax Department. We are working closely with PPC's Vice President of Global Tax, Marcus Whitfield, and members of PPC's internal tax department to locate and assemble responsive materials from multiple business units, shared-services functions, and corporate departments. Mr. Whitfield's team is coordinating with PPC's finance, accounting, and operations personnel across several divisions to identify and retrieve all relevant documentation. This internal effort requires time to ensure that all responsive materials are identified, collected, and organized for production.
PPC's Demonstrated Good Faith and Cooperation. PPC has maintained a fully cooperative posture throughout the examination and is committed to continuing that cooperation. Since the commencement of the examination and the issuance of the first Information Document Request, PPC has timely responded to all prior IDRs — specifically, IDR Nos. 1 through 13 — in each case meeting or beating the applicable response deadline. PPC has not previously requested an extension of time to respond to any IDR issued in this examination. The present request is necessitated solely by the breadth and complexity of IDR No. 14, the multi-jurisdictional nature of the responsive materials, and the need for privilege review, and it should not be construed as reflecting any change in PPC's commitment to cooperating fully with the examination team.
Requested Extension
In light of the foregoing, PPC respectfully requests that the response deadline for IDR No. 14 be extended by thirty (30) calendar days, from the current deadline of October 5, 2022, to a proposed new deadline of November 4, 2022. This extension will allow PPC and its representatives sufficient time to compile a complete, accurate, and well-organized response to IDR No. 14, including all requested agreements, invoices, cost allocation methodologies, supporting workpapers, and related documentation across all four tax years under examination, and to conduct the necessary privilege review of potentially responsive materials.
Commitment to Continued Cooperation
PPC remains fully committed to timely and complete cooperation with the examination team throughout the pendency of this examination. We offer the following additional assurances in connection with this extension request:
First, we would welcome the opportunity to discuss this request with you at your earliest convenience. If a telephone call or in-person meeting would be helpful to address any questions or concerns regarding the scope of IDR No. 14 or the basis for this extension request, please do not hesitate to contact me directly.
Second, if it would assist the examination team, PPC is prepared to provide a partial or interim production of responsive materials in advance of the extended deadline. For example, PPC could produce the executed intercompany service agreements and related amendments on or before the original October 5, 2022 deadline, with the balance of the cost allocation studies, invoices, workpapers, and supporting documentation to follow by the proposed November 4, 2022 extended deadline.
Third, should it be necessary or appropriate, we are prepared to confer with Supervisory Revenue Agent Gerald Meskill regarding any scheduling concerns or to discuss an alternative arrangement that would accommodate the needs of the examination team while affording PPC adequate time to prepare a complete response.
Fourth, we will promptly notify you in the event that PPC is able to complete its response to IDR No. 14 in advance of the extended deadline. It is PPC's intention to produce the responsive materials as quickly as practicable, and PPC will not use the extended deadline as a basis for delay if the response can be finalized sooner.
Contact Information
Please direct any questions, correspondence, or communications regarding this matter to the undersigned at:
Garrett Simmons Calderwood & Harkness LLP 1735 Market Street, Suite 3100 Philadelphia, PA 19103 Telephone: (215) 564-8247
Email: gsimmons@calderwoodharkness.com
Alternatively, you may contact Leonard Cross, Responsible Partner on this matter, at the same address, by telephone at (215) 564-8212, or by email at lcross@calderwoodharkness.com.
We appreciate your consideration of this request and look forward to your response.
Respectfully submitted,
CALDERWOOD & HARKNESS LLP
By: ________
Garrett Simmons Associate, Tax Department
cc (via email):
Leonard Cross, Esq., Calderwood & Harkness LLP (Responsible Partner)
Sylvia Hartwell, Esq., Calderwood & Harkness LLP (Billing Partner)
Marcus Whitfield, Vice President, Global Tax, Penterra Pharmaceuticals Corp.
Supervisory Revenue Agent Gerald Meskill, IRS Large Business & International Division (Team Manager, Exam Team LB&I-NE-TP-2022-00641)
Enclosures: None