UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT

┐ WHIRLPOOL FINANCIAL CORPORATION; CONSOLIDATED │ SUBSIDIARIES, │ Petitioners-Appellants, > Nos. 20-1899/1900 │ │ v. │ │ COMMISSIONER OF INTERNAL REVENUE, │ Respondent-Appellee. │ ┘

On Appeal from the United States Tax Court; No. 13986-17—Albert G. Lauber, Judge.

Argued: June 9, 2021

Decided and Filed: December 6, 2021

Before: NORRIS, KETHLEDGE, and NALBANDIAN, Circuit Judges. _________________

COUNSEL ARGUED: Gregory G. Garre, LATHAM & WATKINS LLP, Washington, D.C., for Appellants. Judith A. Hagley, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Appellee. ON BRIEF: Mark A. Oates, Robert H. Albaral, A. Duane Webber, Summer M. Austin, Joseph B. Judkins, Meerah Kim, Cameron C. Reilly, BAKER & MCKENZIE LLP, Chicago, Illinois, Rodney H. Standage, WHIRLPOOL CORPORATION, Chicago, Illinois, for Appellants. Judith A. Hagley, Francesca Ugolini, Arthur T. Catterall, UNITED STATES DEPARTMENT OF JUSTICE, Washington, D.C., for Appellee.

KETHLEDGE, J., delivered the opinion of the court in which NORRIS, J., joined. NALBANDIAN, J. (pp. 17–29), delivered a separate dissenting opinion. Nos. 20-1899/1900 Whirlpool Fin. Corp. v. CIR Page 2

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OPINION _________________

KETHLEDGE, Circuit Judge. A subsidiary of Whirlpool Corporation with a single part- time employee in Luxembourg sold refrigerators and washing machines to Whirlpool in a series of complicated transactions. By means of a 2007 corporate restructuring, neither the Luxembourgian subsidiary nor Whirlpool itself paid any taxes on the profits (more than $45 million) earned from those transactions. The IRS later determined that Whirlpool should have paid taxes on those profits. Whirlpool appealed that determination to the Tax Court, which granted summary judgment to the Commissioner. We affirm.

I.

A.

Before 1962, the income of a foreign subsidiary of an American corporation generally was not subject to taxation in the United States until that income was distributed to the American parent. See Ashland Oil, Inc. v. Comm’r of Internal Revenue, 95 T.C. 348, 354 (1990). This regime encouraged American companies to structure their operations so as to shift their income to foreign subsidiaries, whose income would not be subject to taxation in the United States. The American parent could thereby defer indefinitely any taxation in the United States of the income shifted to the foreign subsidiary.

By 1961, the practice of shifting income to foreign subsidiaries for purposes of tax deferral had become widespread among multinational corporations. That year President Kennedy described the problem as follows:

The undesirability of continuing deferral is underscored where deferral has served as a shelter for tax escape through the unjustifiable use of tax havens such as Switzerland. Recently m