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Microsoft

IRS Says Microsoft Owes an Additional $29 Billion in Back Taxes (cnbc.com) 74

Posted by msmash from the closer-look dept.
Microsoft received Notices of Proposed Adjustment from the Internal Revenue Service for an additional tax payment of $28.9 billion, the company said in an 8-K filing Wednesday. From a report: Microsoft said the dispute concerns the company's allocated profits between countries and jurisdictions between 2004 and 2013. It said up to $10 billion in taxes that the company has already paid are not reflected in the proposed adjustments made by the IRS. Microsoft plans to contest the notices through the IRS' administrative appeal and is willing to go to judicial proceedings, if necessary.
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IRS Says Microsoft Owes an Additional $29 Billion in Back Taxes More

IRS Says Microsoft Owes an Additional $29 Billion in Back Taxes

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  • Dang! (Score:5, Funny)

    by dskoll ( 99328 ) on Thursday October 12, 2023 @09:46AM (#63920497) Homepage

    On the bright side, MSFT will dig up the chump change from between the break room couch cushions.

    • This isn't chump change for Microsoft (Score:5, Informative)

      by DeplorableCodeMonkey ( 4828467 ) on Thursday October 12, 2023 @10:13AM (#63920557)

      Microsoft has a great balance sheet [yahoo.com] with a lot more cash than debt, but this will have a major impact on the cash:debt ratio.

      FWIW, $29B is almost 1/3 of their cash on hand.

      • It is chump change, and Microsoft has already won. The issue stems from taxes in 2004. If Microsoft can stall this out sufficiently, the cost of money means that Microsoft got a taxpayer subsidized loan.

        In 2004, Microsoft's stock price was about $25. Microsoft stock is currently at $332. So by keeping the money, Microsoft netted a 10x return, against whatever the final reduced settlement with the IRS might eventually be.

        What was the opportunity cost of the IRS for this effort? After spending 19+ year

        • Re: (Score:2)

          by gtall ( 79522 )

          MS does get any money when their stock price goes up. Their executives that hold the stock can realize gains, their other shareholders can realize gains. If MS were to buy its stock in a buy-back, it would cost them more at the elevated price.

        • Re:This isn't chump change for Microsoft (Score:4, Informative)

          by ZipNada ( 10152669 ) on Thursday October 12, 2023 @11:25AM (#63920707)

          It is "$28.9 billion in taxes, plus penalties and interest" which could be very substantial, in which case it wouldn't be a "subsidized loan".

          https://www.washingtonexaminer... [washingtonexaminer.com]

        • What was the opportunity cost of the IRS for this effort? After spending 19+ years getting Microsoft for this issue, how many other issues with how many companies were missed???

          It has largely been back-burnered. Many large enforcement issues have been put off for years due to lack of IRS funding to pursue them. Now that they are acting on it, this will require a team of IRS attorneys years in court/negotiating with the MS legal team to reach a settlement. The big loss to the US is that, thanks to inflation, the money recovered will be worth a lot less than it was originally.

          Expect to see more actions like this now that IRS enforcement funding has been allocated. Unless congres

        • The IRS will charge interest and penalties for late tax payments.

          I doubt this would amount to a "free loan" in any sense.

      • Re: (Score:2)

        by dskoll ( 99328 )

        It was a joke.

      • Probably has to something to do with Microsoft's cookie jar reserves (revenues earned in one year, but not recognized until a following year).
        Microsoft then recognizes some of these revenues in "bad" quarters to smooth out revenue.
        Cookie jar reserves are *NOT* GAAP.
        In addition, it means they're recognizing taxable income *years* after it was earned and due.
        So now the IRS is upset.

    • On the bright side, MSFT will dig up the chump change from between the break room couch cushions.

      That's a lot of coin. Lucky thing Bill was "meeting the interns" on that couch.

  • Frankly... (Score:4, Insightful)

    by jd ( 1658 ) <`imipak' `at' `yahoo.com'> on Thursday October 12, 2023 @09:50AM (#63920503) Homepage Journal

    I'm tired of companies using creative accounting to stiff the countries involved of the taxes owed. Taxes are not theft and it is a sign of maturity and responsibility to pay them properly in a timely manner.

    Of course, the tax code is so full of holes the Swiss could use it as a template for making cheese. It would be far better if the US tax code was greatly simplified with an almost total elimination of schemes to "incentivize" good behaviour. (Because it doesn't. It simply gives incentives to dodge taxes.)

    • thank you for this. I agree, taxes are not theft, what IS theft is willingly not paying your taxes and then trying to lie your way out of it in court

      • Re: (Score:2)

        by HBI ( 10338492 )

        If someone gets fired at MSFT for this, then i'll buy that maybe this was a mistake. Don't hold your breath.

        • Re: (Score:2, Informative)

          by LazarusQLong ( 5486838 )
          Naw, it is 'creative accounting'. No one will be fired and it is doubtful that MSFT will fork over $29 billion. Most likely, even if they are found guilty and ordered to pay, they will claim some hardship or something and the judge will give them a reduction or a payment scheme that will end up having them pay something less than what they owe. Yes, I am cynical. As an aside, if my math is correct, $29 billion is probably about .7% of the federal government's budget, so this is real money we are talking abo
      • Microsoft is right there to take on big gov't contracts and fat subsidies along with using kids educated in the schools I pay for who drive to work on the roads I pay for.

        And a *lot* of that comes from federal money.

    • Re: (Score:1)

      by Anonymous Coward
      What makes it seem unethical to me is that companies can declare to the tax dept that they made no/little taxable money, and at the same time declare publicly to investors, creditors, banks, etc that they made billions.

      And it's worse if they can declare those conflicting statements in the same country. I can understand if there really are two different entities - one making money in a different country, and one losing money in yet another country. However too often I see a company saying it's not making tha

      • Simple answer, stop taxing corporate profits and tax corporate INCOME. They could still write off actual expenses, but NOT including dividends.

    • lay them out. Turn each of them clockwise once keeping them square. Then stack them up.

      I bet you don't have any holes going all the way through anymore, do you?

      That's how public health works. It's why you mask up during an outbreak even if you're vaxxed.

      One of the problems is that a lot of people desperately want simple answers to complex problems because they want to believe they can understand every aspect of the world they're forced to interact with.

      But as the saying goes, for every suffi
      • For once I agree with you - simplicity does not guarantee a tax code is "good" by any reasonable standard, for example proportional to consumption of goods and services. Bankers can invent a lot of crafty ways to multiply wealth and enable consumption without generating taxable income if you define income in any simple (naive) way. I'm sure some of the complexity is to create loopholes, but a lot of it is also to close them.

        • For once I agree with you - simplicity does not guarantee a tax code is "good" by any reasonable standard, for example proportional to consumption of goods and services. Bankers can invent a lot of crafty ways to multiply wealth and enable consumption without generating taxable income if you define income in any simple (naive) way. I'm sure some of the complexity is to create loopholes, but a lot of it is also to close them.

          Simplicity does not mean good. But it means it's easier to assess what's not working. Without worrying about lots of side effects.

          It's a lot like computer code. Would you rather try to solve problems with simple code or spaghetti?

          • The simple code is only better if it actually gets the job done. Would you rather use an operating system that has millions of lines of code, or limit yourself to, say, 50,000 lines? The first version of Linux only had 8k lines. But it just doesn't get the job done.

      • That's how public health works.

        Public health in the US is complex and inconsistent and barely works at all when it does work mostly because of decades-long opposition from the American Medical Association. A PAC representing doctors who treat symptoms is not going to lobby to prevent the causes of those symptoms.

        One of the problems is that a lot of people desperately want simple answers to complex problems because they want to believe they can understand every aspect of the world they're forced to interact with.

        You do realize that you brushed aside the desire for simple answers by providing a simple answer, don't you? Just pointing it out because it made me laugh.

    • Re: (Score:2)

      by labnet ( 457441 )

      And it makes it unfair for small companies that can’t take advantage of the big companies that pay almost no tax.

  • Will. the IRS... (Score:3)

    by PPH ( 736903 ) on Thursday October 12, 2023 @09:50AM (#63920505)

    ... take that in Microsoft 365 subscription credits?

  • IRS: We have reason to believe you've cheated the United States of America out of $29,000,000,000.
    Microsoft: Ha, gotcha dumbasses. We've only actually cheated the good citizens of the United States out of $19,000,000,000.
    IRS: Oh no... you sure told us...

    I really hope the IRS uses that statement as evidence of knowing intent to defraud the federal government and hits them with an additional $10B fine.

    • Once a company reaches a certain level, there are going to be disputes between what the company thinks it owes and what the IRS thinks it owes. The bigger the company, the bigger the discrepancy. There's usually a settlement somewhere in between, but occasionally one side pushes it into court.

      The disagreements usually aren't this big, but there probably should be more. It's notable that this is for a 10-year period ending in 2013, meaning that this audit has been open at the IRS for a long time. It can take

  • To pay up, they have time 'til next Monday.

  • Doesn't the IRS have better things to do than shake down our storied corporations, when there are perfectly good citizens to shake down? I thought the job of the IRS was to instill fear into the masses?

  • Oops, the national debt is over $33.5 trillion, so this is only about .08% of that ( 1/10 of 1%). We're not going to tax our way out of debt, we need to stop throwing away money.

    • Re: (Score:2)

      by gtall ( 79522 )

      We both need entitlement reform and higher taxes. SS and Medicare are not throwing money away unless you could giving SS to the wealthy....but that latter is a pittance. SS and Medicare are 2/3 of the fed. budget.

      One thing they could do is eliminate the cap on SS income taxes. If you work in the U.S., you owe the American society. Making over the cap does not mean your obligation stops there.

    • Re: (Score:2)

      by Pascoea ( 968200 )
      I feel as though "throwing away money" isn't a very fair way to put it. We're perfectly content with burning it instead.

      To actually seriously comment... We need to do both. Plug the holes at the bottom of the sieve, and start pouring more into it.

      • Agreed. The left spends more and the right cuts taxes. Both are opposite of what has to happen eventually. Unbelievably the house has proposed increasing the standard deduction by 2K for the next couple of years after hammering the recent spending increases as unsustainable. https://finance.yahoo.com/news... [yahoo.com] You can't make this stuff up.

        • Re: (Score:2)

          by Pascoea ( 968200 )

          Unfortunately we are barreling into the same situation Greece found itself in a decade-ish (?) ago: An unsustainable financial situation that had to be solved by years severe austerity measures and high taxes. Eventually we have to figure out that we can't spend our way out of debt.

          The only point I would disagree on is the "Left spends more". Both parties are equally as guilty on this aspect, they just like to spend it on different things.

        • Clarification is that the right cuts taxes and spends more which drives up the deficit. The 2017 Tax-Cuts-and-Jobs-Act was a tax cut that was almost entirely funded by deficit spending to make up the revenue shortfall. Bush Jr., Bush Sr and Reagan also ran up big deficits when in office as well. The idea that Republicans are these budget hawks that restrain spending is an illusion they have cast by just saying it over and over but never actually doing it.

    • So we should just let tax cheats not pay billions, because it's not enough billions to take care of an entire nation's debt in one payment?

      You didn't think before writing that, did you?

      • There was no income tax before 1913, and that was temporary to pay for war. The government has grown and grown and is completely unsustainable, and it creates more problems than it solves.

        The best governments are small, local, and accountable; the federal level should be limited to actual defense (over $100B to Ukraine for the war machine?!?). We're spending 10% of our ridiculous national budget on interest alone. Social Security is a giant Ponzi scheme which prevents investment and growth.

        The problem i

      • Here's one example, $7B [slashdot.org] to try to buy votes by promoting a highly inefficient energy storage technology over better solutions. That's a lot of taxes from a lot of hard working people, funneled from them to the C suites.

        By the way, I highly doubt MS were being tax cheats at all. The tax system is extremely complex, and there is a lot of gray area in accounting. The reporting burden, on companies and individuals, is a lot of friction that prevents productive work.

  • [Microsoft said up to $10 billion in taxes ... are not reflected in the proposed adjustments ... and is willing to go to judicial proceedings, if necessary.

    Wow, willing to go to judicial proceedings... they must really believe in the rightness of their position!!

    • Nah, they believe in lawyers delaying as long as possible, because they make more money having it in their pockets as long as possible before being forced to pay up by a federal judge.

      And the lawyers are likely in-house counsel, so they are paying their salaries regardless.

      • Yes. When ten billion dollars is at stake, if there's even a 1-in-10 chance you'll win one tenth of the disputed amount, you most definitely send a squad of lawyers.
  • In 2010 Bill Gates' dad commented on the ways kids like his, and the firms they ran, would do all they could to avoid paying taxes: https://www.investmentnews.com... [investmentnews.com]

  • Schadenfreude is being updated by Merriam Webster as we speak.

  • ... to ensure they'll litigate it as thoroughly as possible. It's worth chasing every last angle of attack.

    I'm surprised it's even possible to go back to 2004... that's pretty amazing. In fact, it might be perfectly legal for MS to have destroyed records from that far back as part of their retention policy.

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