Microsoft vs. IRS: Clash Over $28.9 Billion in Unpaid Taxes

According to the Internal Revenue Service (IRS), Microsoft is reportedly facing a hefty $28.9 billion tax bill for the years between 2004 and 2013. However, the software giant strongly disagrees with this claim.

Microsoft has recently rejected Notices of Proposed Adjustment (NOPAs) from the IRS, arguing that their provisions for income tax contingencies are sufficient as of September 30. This information was disclosed in a regulatory filing submitted on October 11.

One of the main points of contention is related to transfer pricing, which involves the allocation of profits across various countries and jurisdictions. The IRS audit, which has been ongoing since 2012, is investigating whether Microsoft has engaged in any unlawful practices to evade paying taxes in the United States, such as transferring profits to tax havens.

Microsoft defends its actions, stating that it has adhered to legally permissible cost-sharing arrangements. According to Daniel Goff, Corporate Vice President of Worldwide Tax and Customs, the subsidiaries of Microsoft were entitled to share in the profits related to the costs of developing certain intellectual property under IRS cost-sharing regulations.

The tech giant based in Redmond, Washington, intends to challenge the proposed adjustments through the IRS’s administrative appeals office, and even possibly in court. The dispute resolution process could potentially span several years.

Quotable: Microsoft disputes outdated IRS tax calculations

“We have changed our corporate structure and practices since the years covered by the audit, and as a result, the issues raised by the IRS are relevant to the past but not to our current practices.”

—Statement from Daniel Goff’s Follow Google News