Blocking The Blocked Income Rules? Loper Bright's Influence Over The Eighth Circuit's 3M Decision.

On October 1, 2025, the Eighth Circuit decided 3M Co. v. Commissioner in the taxpayer's favor, based on its application of Loper Bright. The question presented in the case was whether the IRS had the authority to reallocate royalty income to a U.S. parent company that its foreign subsidiary was prohibited from paying under foreign law. The court held that the best interpretation of the governing statute did not permit the IRS's reallocation.

3M is the U.S. parent company of a multinational group and licenses intellectual property to its global subsidiaries. At issue in this case was the application of the Blocked Income Rules under Treas. Reg. § 1.482-1(h)(2) ("Blocked Income Rules") to the license and royalties between 3M and its Brazilian subsidiary, because a Brazilian law capped the amount of royalties that a Brazilian subsidiary may pay to a non-Brazilian parent company. In this case, 3M's Brazilian subsidiary paid $5.1 million for the use of 3M's intellectual