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IRS says Microsoft owes $29 billion in back taxes

Microsoft logo with $100 bill imageImage: Microsoft

One of the unique, visceral terrors of American adulthood is getting a letter with “Internal Revenue Service” on the return address. Just ask Microsoft’s accounting department. According to an SEC filing dated October 11th, the company received an overdue tax bill from the IRS for an incredible $28.9 billion (with a “b”) dollars. Microsoft will fight the adjusted bill, to the surprise of absolutely no one.

According to a blog post attached to the filing written by Microsoft vice president Daniel Goff, the IRS arrived at the startling figure after auditing the company’s corporate returns for the years between 2004 and 2013. The core of the adjustment is, quote, “the way Microsoft allocated profits during this time period among countries and jurisdictions.”

International corporations like Microsoft often move income and profits among offices in several nations to try and find the most favorable tax laws. While the practice is fairly universal at Microsoft’s level, wading into the often conflicting world of tax law can lead to accusations of tax avoidance. Ireland is considered a semi-legal tax haven for such purposes, and Microsoft has extensive corporate offices in Dublin, along with its competitors Apple, Google, and Facebook.

Though Microsoft is one of the world’s largest tech companies with a market cap of more than two trillion dollars, $29 billion would still represent a huge hit to its profits. For the sake of comparison, the company’s acquisition of game publisher Activision-Blizzard has a proposed value of $68.7 billion.

Goff did not provide a more precise breakdown of the IRS Notices of Proposed Adjustment, but said that the company will appeal the bill starting with $10 billion in possible rebates from the Tax Cuts and Jobs Act of 2017, which significantly cut the tax rate for the largest American companies. Microsoft has already promised to appeal the decision and go to court if the IRS won’t relent, a process that could take years.

Michael is a former graphic designer who’s been building and tweaking desktop computers for longer than he cares to admit. His interests include folk music, football, science fiction, and salsa verde, in no particular order.

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