Whirlpool Petition For Cert

Published date01 November 2022
Subject MatterCorporate/Commercial Law, Tax, Corporate and Company Law, Income Tax, Securities
Law FirmFreeman Law
AuthorMr Gregory Mitchell

In a brief filed on October 19, 2022, the IRS asked the U.S. Supreme Court to refuse to review the decision of the Sixth Circuit affirming, in a 2-1 split decision, that $45 million earned by appliance maker Whirlpool's controlled foreign corporation ("CFC") in Luxembourg was foreign base company sales income taxable under Subpart F of the Internal Revenue Code.

Whirlpool's parent company maintains that income from its Luxembourg affiliate's sales of appliances to its Mexican subsidiary cannot be taxed under Subpart F because it was generated by two foreign affiliates manufacturing different products. However, the IRS contends that the transactions fall within the I.R.C. '954(d) definition of foreign base company sales income ("FBCSI") earned by a U.S. parent's CFC and are therefore taxable under Subpart F.


Through its domestic and foreign subsidiaries, Whirlpool engages in the manufacture and distribution of major household appliances, including refrigerators and washing machines, in the United States and abroad. Whirlpool International Holdings, S.a.r.l. ("WIH"), is a wholly owned subsidiary of Whirlpool organized under the laws of Luxembourg. When it filed its petition, WIH had its principal place of business in Luxembourg. Before December 31, 2010, WIH was known as Maytag Corp. (Maytag) and was likewise engaged in the manufacture and distribution of household appliances.

During 2007-2009, Whirlpool restructured its Mexican manufacturing operations, driven largely by tax considerations. It organized a new entity in Luxembourg, which was a controlled foreign corporation (CFC) for Federal income tax purposes. Through a branch in Mexico, the Luxembourg CFC took over (at least nominally) the manufacturing operations previously conducted by a subsidiary of Whirlpool's Mexican CFC. The Luxembourg CFC then sold the finished products to Whirlpool and its Mexican CFC, which distributed the products for sale to consumers. The Luxembourg CFC, which had one part-time employee, added no appreciable value to, but earned substantial income from, these sales transactions.

The Internal Revenue Service ("IRS") determined that the sales income derived by the Luxembourg CFC constituted foreign base company sales income (FBCSI) under section 954(d) and was thus taxable to Whirlpool as subpart F income under section 951(a). The IRS accordingly increased Whirlpool's taxable income for 2009 by $49,964,080, decreasing pro tanto its consolidated net operating loss (NOL)...

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