Microsoft Faces $28.9 Billion Tax Underpayment Claim from the IRS
The Internal Revenue Service (IRS) in the United States has notified Microsoft of a tax underpayment amounting to $28.9 billion, including penalties and interest, covering the period from 2004 to 2013, as reported by The Verge with reference to documentation filed with the U.S. Securities and Exchange Commission. Microsoft has expressed disagreement with the figures presented by the tax authority and has stated that it will vigorously dispute them.
Daniel Goff, Microsoft’s Corporate Vice President for International Tax and Customs, commented on the results of the IRS tax audit in his blog. He noted that the company had changed its corporate structure and operational methods over the years covered by the tax audit. Goff stated, “The issues raised by the IRS relate to the past, not our current practices.”
Goff also pointed out that the recalculations by the IRS do not take into account amounts paid by the company under the Tax Cuts and Jobs Act, which, in his view, could reduce the final tax underpayment figure to $10 billion. Microsoft maintains that the IRS disagrees with how the company allocated profits on an international level through a transfer pricing arrangement called cost-sharing.
As a result, Microsoft has declared its disagreement with the “proposed adjustment” by the IRS and will “vigorously dispute” it. The company also mentioned in its blog that it does not expect a resolution to the dispute within the next 12 months.
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