Carole King’s 1971 lament echoes for Amazon.com Inc. & Subsidiaries, Docket No. 311997-12, filed 5/15/14, as Judge Lauber shuts down Amazon.com and friends when they try to wild-card a change in their RAB from a Revenue RAB to a Gross Profit RAB on the eve of trial, by way of a motion to amend their petition.

For those unfamiliar with offshoring profits to captive subs and increasing deductions to onshore parents, take a look at Reg. 1.482-7A. When Amazon.com and its playmates entered into their qualified cost sharing arrangement (QCSA) nine years ago, the Reg. was 1.482-7, but the changes made by the shift don’t affect the years at issue.

The Reg. allows a menu of methods for determining the share of expenses allocated to the onshore and offshore components (and thus deductions arising from shared costs). Those are called Reasonably Anticipated Benefits (thus RAB). Deductions follow what goodies each party to the QCSA expects to get out of the deal, and they must “buy-in” to the deal based on the FMV of what intangibles they are contributing.

Amazon.com didn’t pick one explicitly at the get-go, but Judge Lauber finds they were using Revenue RAB when the deal was done.

And both Amazon.com and its playmates, and IRS, always went with Revenue RAB from the beginning nine years ago until last year, when Amazon.com and its playmates decided that Gross Profits RAB was the way to go, and earlier this year amended their QCSA so to state.

Judge Lauber sorts out the contentions: “Petitioner contends that this amendment is appropriate because the Gross Profit RAB is superior to the Revenue RAB and because “[a] controlled participant’s anticipated benefits must be measured on the most reliable basis, whether direct or indirect.” See Treas. Reg. § 1.482-7(f)(3)(ii). Petitioner alleges that switching to the Gross Profit RAB as the formula for allocating development costs would decrease its taxable income for 2005-06 by $27.8 million. Respondent has informed the Court that ‘at no time before March 7, 2014, did petitioner indicate even informally that its Revenue RAB tax reporting was incorrect or that it was reconsidering its position on RAB shares.’” Order, at p. 3.

And Amazon.com and playmates haven’t said whether they’re amending their “buy-in” price for the intangibles contributed.

Judge Lauber isn’t impressed with this audible at the line of scrimmage: “Petitioner seeks to revise its RAB formula for 2005-06 eight years after those years ended and 15 months after it filed its petition. We agree with respondent [IRS] that petitioner’s delay in raising this issue is unjustified. On occasion, we have allowed a party to raise a new matter despite prejudice to the opposing party upon a showing of good cause for the delay, for example, where the party seeking to amend lacked an opportunity to raise the matter sooner.” Order, at p. 4.

But Amazon.com and playmates say they reach the Gross Profits RAB conclusion by examining data they had in 2005-2006. So, says Judge Lauber, if you had it, what were you waiting for?

“The Court also finds that allowing petitioner to raise this issue now would unfairly prejudice respondent. This case involves complex, fact-intensive issues that the parties anticipate will take a month to try. Discovery is nearing completion, and trial is set for November 3, 2014. During the examination phase, the IRS accepted the Revenue RAB, and petitioner repeatedly reaffirmed it. As a result, respondent has neither prepared for trial on this issue nor conducted discovery concerning it. Respondent had no reason to anticipate that petitioner would attempt to discard its Revenue RAB at this late stage of trial preparation.” Order, at p. 5 (Citations omitted).

Amazon.com and playmates claim only minimal discovery would be needed, but Judge Lauber buys into IRS’ argument that it would be a whole new ballgame, involving complex economic, regulatory and factual issues, and might even need expert testimony.

So Amazon.com and playmates, play it as you started it. It’s too late baby.