Microsoft, a technology giant, has made public the Internal Revenue Service’s (IRS) request for a substantial sum of taxes that the IRS claims the company has not paid.
This request, conveyed through notices of proposed adjustments (NOPAs), amounts to a hefty $28.9 billion, excluding penalties and interest, covering tax years from 2004 to 2013, as per a Securities and Exchange Commission (SEC) filing submitted by Microsoft.
Microsoft’s Significant Tax Contributions
The disagreement primarily centers on how Microsoft allocated profits across various countries and jurisdictions during the specified period. Microsoft staunchly defended its actions, stating that they were in compliance with IRS rules and regulations.
Additionally, the company highlighted that the IRS did not consider up to $10 billion in tax payments made under the Tax Cuts and Jobs Act, passed into law in late December 2017.
Microsoft, in the SEC filing, emphasized that it has paid over $67 billion in taxes to the U.S. government since 2004. Regarding income tax contingencies, the company reported having adequate allowances and conveyed to investors that it does not foresee a significant increase or decrease in tax contingencies related to these issues over the next 12 months.
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Prolonged Tax Dispute Resolution
However, the resolution of this tax matter is expected to take a considerable amount of time. Microsoft estimated that the appeals process through the IRS could last for several years.
This disclosure has come just under two weeks before Microsoft’s planned announcement of its financial results for the first quarter of fiscal year 2024.
In the previous fiscal year (2023), Microsoft showcased robust financial performance, reporting a revenue of $211.9 billion, signifying a 6.9% increase compared to the preceding year.
Nonetheless, there was a marginal decrease in the yearly net income, with a 0.5% reduction, resulting in a final figure of $72.36 billion.
As the company navigates this tax dispute, the financial community will closely monitor its upcoming financial results and any potential impact on its operations and standing in the industry.
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