According to an SEC filing, the Internal Revenue Service (IRS) has informed Microsoft that the company owes back taxes of $28.9 billion “plus penalties and interest” for the tax years 2004 through 2013.
Microsoft’s corporate VP for worldwide tax and customs Daniel Goff responded to the audit in a blog post, and says the company has changed its corporate structure and practices since the years covered by the audit.
The issues raised by the IRS are relevant to the past but not to our current practices.
Daniel Goff
The IRS’s proposed adjustments don’t reflect the amounts the company paid under the Tax Cuts and Jobs Act, according to Goff, who claims that could decrease the final tax owed by up to $10 billion.
Additionally, Microsoft claims the IRS disagrees with the way Microsoft allocated profits internationally through an arrangement of transfer prices called cost-sharing.
Microsoft says it disagrees with the IRS’s “proposed adjustments” and will “vigorously contest” them. In the same blog, Microsoft says it doesn’t expect the dispute to be resolved in the next 12 months.
The company said in its filing;
Microsoft disagrees with these proposed adjustments and will pursue an appeal within the IRS, a process expected to take several years. We believe we have always followed the IRS’s rules and paid the taxes we owe in the U.S. and around the world.
Microsoft said that as of Sept. 30, 2023, it believes its allowances for income tax contingencies are adequate.
Separately, the company recently reigned victorious over the FTC, which failed to secure a preliminary injunction against Microsoft’s plan to acquire Activision Blizzard for $68.7 billion — a deal expected to close on October 13th.
