Amazon v. Commissioner of IRS
Amazon.com Inc & Subsidiaries v. Commissioner of Internal Revenue, T.C. Memo.
2014-245, Docket No. 31197-12.UNITED STATES TAX COURT,
December 10, 2014.
Case Details:
The Internal Revenue Service determined substantial deficiencies in the petitioner’s Federal income tax for 2005 and 2006. The deficiencies stem from a cost sharing arrangement (CSA) executed between petitioner and Amazon Europe Holdings Technologies SCS a Luxembourg affiliate.
In entering into the CSA, petitioner transferred previously existing, intangible assets to AEHT. The parties agreed to share future intangible development costs. Because of this, the court is required to determine the proper amount of AEHT’s buy-in obligation with respect to the transferred property (including technology, trademarks, and customer information) for income tax regulation.
For this case, Jeff Bezos was identified as a witness and was to appear in court. He moved to “quash” or remove the subpoena.
Case Timeline:
September 2014: Respondent first identified Mr. Bezos as a potential witness.
October 14, 2014: Counsel for petitioner accepted service of a trial sub-poena ad testificandum on Mr. Bezos. In his pretrial memorandum, respondent listed Mr. Bezos as a potential witness and indicated that the topics of his testimony would include the following: the history of Amazon; Amazon’s growth and success; on-line retail and other businesses and products; Amazon’s e-commerce technology; and Amazon’s restructuring between 2004 and 2006.
October 21, 2014: Petitioner filed a motion to quash the trial subpoena. Petitioner later supplemented this motion with an affidavit from Mr. Bezos. The affidavit states that appearing at trial would require a significant commitment of time by Mr. Bezos and would cause a substantial disruption of his management responsibilities during Amazon’s peak holiday season.
Plaintiff’s Arguments:
Because Mr. Bezos was identified as a witness, he was subpoenaed and was to testify on the topics stated above, along with the following: “the Amazon brand”; early spending on marketing and advertising; the financial metrics used by Amazon in making important decisions; Amazon’s internal discount rate in evaluating investments; statements made in Amazon’s 1997 and 1999 letters to shareholders and certain annual reports; Amazon’s intellectual property management; Amazon’s R&D budget; Amazon’s growth rates; early Amazon risks versus risks in 2004-2005; Amazon’s geographic risks; Amazon’s business strategy as “a flywheel model”; statements in petitioner’s expert witness reports; management’s financial projections; the transfer of intangibles to AEHT; and Mr. Bezos’ “vision for Amazon.”
Defendant’s Arguments:
In the Tax Court, when a subpoena is issued solely for the attendance of a witness at trial and that person objects to appearing, he or she may move for a protective order to “quash” or modify the subpoena.
Summary & Conclusion:
After balancing the need for the requested testimony against the burden on Mr. Bezos, the Court concludes that the burden imposed on him would be “undue.” The Court grants the petitioner’s motion to quash subpoena.