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, according to an SEC filing.
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,” Goff states.
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. 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.