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Ahead of its acquisition of Activision Blizzard that is expected to be finalized soon, Microsoft’s finances are expected to take a big hit thanks to the Internal Revenue Service slapping the company with a fee for $28.9 billion in back taxes.
This hefty tax bill was spotted in an 8-K filing this week (via CNBC), and according to the IRS, Microsoft owes some big cash from profits that it made from 2004 to 2013. The IRS is disputing how Microsoft allocated its profits during this period among countries and jurisdictions in which it operated, but Microsoft argues that up to $10 billion that it paid in taxes have not been taken into consideration by the IRS and its new figures.
“Microsoft disagrees with these proposed adjustments and will pursue an appeal within the IRS, a process expected to take several years,” Microsoft said in response to CNBC. “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 historically has been one of the top US corporate income taxpayers. Since 2004, we have paid over $67 billion in taxes to the US.”
Microsoft won’t be ponying up more than a LinkedIn acquisition’s amount of cash right away, as the company will first contest the notices through the IRS administrative appeal process and the judicial process if necessary. This is expected to be a lengthy procedure, and Microsoft believes that it’ll take more than a year to resolve this issue. The Xbox company also added that as of September 30, 2023, it believes that its allowances for any income tax contingencies are “adequate”.
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