Leila,
Copying Leonard and Sylvia so everyone has visibility on where we stand.
We've been in active IDR response mode since the examination opened on May 16, 2022, with IDRs flowing from Revenue Agent Patricia Dunleavy and the LB&I exam team (Exam Team ID LB&I-NE-TP-2022-00641; PPC EIN 22-3741856). The pace has been steady — we've already submitted several responses and I expect the requests to keep coming at a similar clip over the next several months. I want to make sure we stay organized, so the purpose of this email is to (1) recap where we are on completed IDR responses, (2) assign responsibilities for the current batch of open IDRs with internal deadlines, and (3) coordinate document collection from both PPC (Marcus Whitfield's team) and Crestfield & Associates (Susan Lam).
**Completed IDR Responses (IDRs 1–8)**
For the record, here's a quick summary of what's been submitted to date:
- **IDR No. 1** — Corporate structure and organizational charts — responded July 8, 2022 - **IDR No. 2** — CSA agreement and amendments (effective July 1, 2012) — responded July 15, 2022 - **IDR No. 3** — Legacy IP license agreement (4.5% royalty rate) — responded July 22, 2022 - **IDR No. 4** — Contemporaneous transfer pricing documentation, TY 2017–2020 (prepared by Crestfield) — responded August 1, 2022 - **IDR No. 5** — PCT valuation report and workpapers ($312M payment) — responded August 10, 2022 - **IDR No. 6** — R&D cost pool and allocation methodology (qualified R&D costs ranging from $487.3M in 2017 to $598.4M in 2020; cost-sharing percentages 38.2%–42.7%) — responded August 18, 2022 - **IDR No. 7** — PBI Irish statutory financial statements and Irish tax returns, TY 2017–2020 — responded today, August 25, 2022 - **IDR No. 8** — PBI personnel and headcount data (52 employees in 2012 growing to 185 in 2020, including Managing Director Aidan Naughton) — response is in final review and will go out shortly
**Pending IDR Assignments**
Here's where I need everyone focused. Below are the current open IDRs with assignments, internal draft deadlines, and target submission dates:
**IDR No. 9 — PBI Board Minutes and Governance Documents** - Assigned to: Nazari - Internal draft due: September 5, 2022 - IRS submission target: September 12, 2022 - Notes: Leila, please coordinate directly with Marcus Whitfield to obtain the complete set of PBI board minutes. Aidan Naughton's team in Dublin will need to compile — there were 42 board meetings held in Dublin during 2017–2020. This is a critical production. These minutes will be some of our strongest evidence of PBI's independent decision-making authority and economic substance, so we need the full set. Please review carefully and flag any minutes that contain privileged communications or references to legal advice so we can log them properly and withhold or redact as appropriate.
**IDR No. 10 — Intercompany Manufacturing Agreement (PBI / PMI)** - Assigned to: Nazari - Internal draft due: September 12, 2022 - IRS submission target: September 20, 2022 - Notes: This is the cost-plus-8% markup arrangement between PBI and Penterra Manufacturing Ireland Ltd. Should be relatively straightforward — pull the agreement from PPC's intercompany agreement files and make sure we include all amendments.
**IDR No. 11 — Product Revenue Data by Territory (Veritaxol, Imvara, Cerulon), TY 2017–2020** - Assigned to: Simmons (self-assigned — this one ties into the broader economic analysis) - Internal draft due: September 22, 2022 - IRS submission target: October 3, 2022 - Notes: I'll coordinate with Whitfield's team at PPC to get detailed product-level revenue breakdowns segmented by Americas vs. non-Americas. For reference, the key 2020 figures are: Veritaxol global revenue $3.12B ($1.34B non-Americas); Imvara global revenue $1.87B ($0.79B non-Americas); Cerulon global revenue $0.62B ($0.28B non-Americas). Once we finalize the data, I'll also share it with Dr. Helena Vasquez at Whitmore Valuation Group for incorporation into the CUT and CPM/TNMM benchmarking analyses.
**IDR No. 12 — PBI Office Lease and Physical Presence Documentation** - Assigned to: Nazari - Internal draft due: September 28, 2022 - IRS submission target: October 12, 2022 - Notes: PBI occupies approximately 18,000 square feet at Sandyford Business Park in Dublin. Leila, please request the lease documentation from Ciarán Thornbury at Thornbury & Keogh or directly from PBI. This production supports the economic substance defense, so let's make sure we have a complete package — lease, any sublease arrangements, photos of the facility if available, and anything else that demonstrates genuine physical presence.
**Coordination with Crestfield & Associates**
I've been in regular contact with Susan Lam at Crestfield regarding the contemporaneous TP documentation and underlying workpapers. As a reminder, Crestfield prepared the original transfer pricing documentation for TY 2017–2020 under IRC § 6662(e) penalty-protection standards. We're going to need to pull additional data from Crestfield for the R&D cost pool detail and cost-sharing ratio calculations — I sent Susan an initial documentation request on July 10, 2022 and plan to follow up with her in October for more granular R&D cost pool breakdowns.
Leila — for any financial statement data you need for the PBI-related IDR responses (Nos. 9, 10, 12), please coordinate with Martin Ogilvy's team at Crestfield as needed.
**Coordination with Whitmore Valuation Group**
The Kovel engagement with Whitmore Valuation Group (ref. 1018-00009-KV) has been in place since June 20, 2022. Dr. Helena Vasquez and Dr. Rohan Chakrabarti are beginning their independent economic analyses, which will include a CUT analysis for the royalty rate, a CPM/TNMM analysis for PBI's operating margins, and the PCT DCF valuation. I'll serve as the primary point of contact for channeling data from our IDR productions to the Whitmore team — all information will be routed through C&H to preserve privilege under the Kovel arrangement.
**Important reminder: All communications with Whitmore must go through C&H counsel. Please do not communicate directly with the Whitmore team or copy them on any emails without routing through me or Leonard first. This is essential to maintaining attorney-client privilege over their work.**
**Coordination with Thornbury & Keogh (Ireland)**
Leila, I know you've been liaising with Ciarán Thornbury at T&K in Dublin on the Irish-side documentation, and that will continue to be important. Coming up, we'll need PBI's Irish Revenue filings, documentation supporting PBI's Knowledge Development box claims (6.25% rate), bank records from Glenmore Bank Ireland plc, and PBI's regulatory expenditure records (€47.2M cumulative for 2017–2020). These will feed into later IDR responses and the functional analysis we're developing with Whitmore.
**Privilege Log and Document Review Protocol**
A reminder to flag any documents that may contain attorney-client privileged communications or attorney work product, consistent with the privilege protocol memo Leonard circulated on June 10, 2022. We're maintaining a running privilege log — Leila, you own the privilege log, so please add entries as you identify withheld documents during each IDR production cycle. As always, all IDR response cover letters should use our standard template addressed to Revenue Agent Patricia Dunleavy, referencing Exam Team LB&I-NE-TP-2022-00641 and PPC EIN 22-3741856.
**Upcoming Client Call**
Leonard has a status update call with Marcus Whitfield scheduled for early September to discuss IDR progress and the overall examination timeline. I'd like to have all current IDR assignments in at least solid draft form before that call so Leonard can report accurate status to the client. Please plan your work accordingly.
Also, a quick reminder — the document preservation notice was sent June 6, 2022. As documents come in from PPC, please flag any gaps or potential issues with PPC's preservation compliance so we can address them proactively.
**Action Items Summary**
1. **Nazari:** Draft IDR No. 9 response (PBI board minutes) — internal draft by Sept. 5 2. **Nazari:** Draft IDR No. 10 response (PMI manufacturing agreement) — internal draft by Sept. 12 3. **Simmons:** Draft IDR No. 11 response (product revenue by territory) — internal draft by Sept. 22; coordinate with Whitfield and Whitmore 4. **Nazari:** Draft IDR No. 12 response (PBI office lease/physical presence) — internal draft by Sept. 28; coordinate with T&K 5. **Nazari:** Continue updating privilege log on rolling basis 6. **Simmons:** Follow up with Susan Lam at Crestfield on outstanding data items 7. **Simmons:** Channel IDR production data to Dr. Vasquez at Whitmore for economic analyses 8. **All:** Flag any issues or extension needs to Leonard and Sylvia promptly — don't sit on problems
Thanks, everyone, for staying on top of the volume. I know this is a document-intensive phase, and I appreciate the effort. The IRS exam team has been reasonable on timing so far, and I'd like to keep it that way — staying ahead of deadlines will go a long way toward maintaining credibility with Agent Dunleavy and Team Manager Meskill. Let's not give them any reason to question our responsiveness.
I'm available by phone or in the Philadelphia office if anyone wants to talk through any of this. Don't hesitate to reach out.
Best, Garrett
Garrett Simmons Lead Associate, Tax Department Calderwood & Harkness LLP 1735 Market Street, Suite 3100 Philadelphia, PA 19103 Direct: (215) 553-4187 gsimmons@calderwoodharkness.com