On Tuesday, Express Scripts, a pharmacy benefit company, filed a lawsuit against the United States in the Eastern District of Missouri. The filing claimed that the plaintiff is owed over $34,000,000 in tax refunds after being overtaxed in 2012.
In the year at issue, Express Scripts managed prescription benefit plans for health companies including managed care organizations, health insurers, employers, unions, and other types of healthcare providers. Part of their partnership with Express Scripts included that the health companies would have access to Express Script’s software, which helped these customers administer their prescription benefit plans to their patients and manage claims made for benefit plans.
This software was produced by employees within Express Scripts, is fully their own technology, and was used only within the United States, which the filing explains makes it a “Qualifying Production Property” under the applicable tax laws. Based on that assertion, the plaintiff claimed that they were eligible for the Domestic Production Activities Deduction. In the year in question, companies were provided a deduction from federal income tax based on income derived from domestic production activities. Express Scripts derived gross receipts from licensing or otherwise disposing of the software to its customers, and those gross receipts qualified as Domestic Production Growth Receipts.
In order to get the refund, 9% of one’s Qualified Production Activities Income must be less than the company’s taxable income for the year, and no more than 50 percent of the W-2 wages properly allocable to Express Scripts’ growth receipts for the year. Based on their financials, the plaintiff asserted that they meet all of these requirements and have therefore been wrongly and illegally denied a refund. The plaintiff requested that the court grant them a refund of $34,111,929 or anything above that amount which they find to be legally refundable.
The plaintiff is represented by Bryan Cave.