Microsoft hammered with $29 billion back-tax bill

AppleInsider

The IRS sent a surprise bill to Microsoft, hitting the company with a $28.9 billion bill for back taxes and penalties spanning a decade, starting in 2003.

Microsoft

Microsoft was notified on September 26,2023 via Notices of Proposed Adjustment (NOPA) from the IRS according to an SEC filing. The issues that generated this debt pertains to intercompany transfer pricing.

Microsoft states that it disagrees with the proposed adjustments and will contest the NOPA through the IRS's administrative appeals office. If necessary, the issue will be taken to court, which seems probable at this point.

A statement embedded in the SEC filing from Daniel Goff, Corporate Vice President Worldwide Tax and Customs, shares some color on the situation. He doesn't expect the issues to be resolved anytime soon and the process could take years.

"The IRS says Microsoft owes an additional $28.9 billion in tax for 2004 to 2013, plus penalties and interest," Goff wrote. "The IRS's proposed adjustments do not represent a final determination. Not reflected in the proposed adjustments are taxes paid by Microsoft under the Tax Cuts and Jobs Act (TCJA), which could decrease the final tax owed under the audit by up to $10 billion."

Microsoft disagrees with the IRS's proposed adjustments and fines, citing that the company has always followed the rules and paid taxes owed. Microsoft says that it has paid over $67 billion in taxes to the U.S. since 2004.

Microsoft made $72.4 billion profit in its fiscal year 2023.

The IRS audit covering 2004 to 2013 has concluded, and the results do not have any bearing on present-day operations. It's not clear if operations past 2013 are being examined.

Read on AppleInsider

mayfly

Well, I guess my immutable law of government still applies:

"If we see a pile of money, we're entitled to wet our beaks in it!"

I hope one day that the IRS sees fit to take action against a proven tax cheat, the don of a multigenerational organized crime family. One who has claimed to have earned billions, but paid no federal taxes in 10 out of 15 years starting in 1995. And only $750 in 2016 and 2017.

ATLMacFan1

Am I supposed to know what “intercompany transfer pricing” means or how that adds up to billions of dollars?

BlueLightning

Seems as if wealthy firms and individuals think white collar crime (including evading tax) is good, but they hate it when they experience blue collar crime, such as shoplifting, theft from employees, or smash and grabs.  I see no difference between the two, except the former is usually MUCH larger theft.  If they don't want blue collar crime, then pay the taxes and don't cheat customers.  

mark fearing

mayfly said:

Well, I guess my immutable law of government still applies:

"If we see a pile of money, we're entitled to wet our beaks in it!"

I hope one day that the IRS sees fit to take action against a proven tax cheat, the don of a multigenerational organized crime family. One who has claimed to have earned billions, but paid no federal taxes in 10 out of 15 years starting in 1995. And only $750 in 2016 and 2017.

There's a more reasonable assumption - that they didn't pay their taxes. I've been through this before and the soliton will be far less than what's proposed. But they likely have classification issues with write downs and property. 

gatorguy

ATLMacFan1 said:

Am I supposed to know what “intercompany transfer pricing” means or how that adds up to billions of dollars?

If you do a search using the term "transfer pricing" it will bring up both the explanation of what it is, and instances where transfer pricing has attracted tax authorities and big bills. 

Nikon8

Microsoft.  Time to pay up.  

lam92103

With 70 Billion of profit per year, 30 Billion sounds quite low for 10 years 

ATLMacFan1

gatorguy said:

ATLMacFan1 said:

Am I supposed to know what “intercompany transfer pricing” means or how that adds up to billions of dollars?

If you do a search using the term "transfer pricing" it will bring up both the explanation of what it is, and instances where transfer pricing has attracted tax authorities and big bills. 

Thanks. I ended up getting what I needed from Fortune.

> The dispute centers on a 2012 IRS audit into transfer pricing, a method used by companies to shift profits to tax havens and avoid the US corporate tax rate. At the time, Microsoft had been moving billions of dollars in profits to such jurisdictions as Puerto Rico, a US territory that levies a much lower corporate rate. 

> https://fortune.com/2023/10/11/microsoft-back-taxes-irs-29-billion-satya-nadella/amp/

9secondkox2

This is theft. 

The government wants money. Solution? Just retroactively “adjust” someone’s taxes from years ago! A good solid decade ought to do it. 

Pure evil. If there was ac actual issue all this years ago, the IRS WOULD HAVE NOTIFIED THEM AND THEY COULD PAY WHAT WAS OWED. this isn’t that. This is an extortionist government. 

Microsoft didn’t do anything illegal. They took advantage of the way the tax systems were set up, like any smart company would do. 

darkvader

9secondkox2 said:

This is theft. 

The government wants money. Solution? Just retroactively “adjust” someone’s taxes from years ago! A good solid decade ought to do it. 

Pure evil. If there was ac actual issue all this years ago, the IRS WOULD HAVE NOTIFIED THEM AND THEY COULD PAY WHAT WAS OWED. this isn’t that. This is an extortionist government. 

Microsoft didn’t do anything illegal. They took advantage of the way the tax systems were set up, like any smart company would do. 

The only theft is what Micro$oft did.  And the sad part is that a company with $136 billion in profits in 2022 only has to pay $29 billion in penalties for their decade of theft.

mikethemartian

ATLMacFan1 said:

Am I supposed to know what “intercompany transfer pricing” means or how that adds up to billions of dollars?

It is basically gaming how much one subsidiary charges other subsidiaries of the same company (say in different countries) for goods and services to minimize the amount of taxes paid. 

9secondkox2

darkvader said:

9secondkox2 said:

This is theft. 

The government wants money. Solution? Just retroactively “adjust” someone’s taxes from years ago! A good solid decade ought to do it. 

Pure evil. If there was ac actual issue all this years ago, the IRS WOULD HAVE NOTIFIED THEM AND THEY COULD PAY WHAT WAS OWED. this isn’t that. This is an extortionist government. 

Microsoft didn’t do anything illegal. They took advantage of the way the tax systems were set up, like any smart company would do. 

The only theft is what Micro$oft did.  And the sad part is that a company with $136 billion in profits in 2022 only has to pay $29 billion in penalties for their decade of theft.

Minimizing tax burden by storing your money in a more favorable location (still within US jurisdiction) wasn’t illegal at the time. Retroactively making it so is just theft by the government. Pure and simple. “Adjustment” my left buttock! Microsoft didn’t do anything wrong. They looked at options available to them and utilized them. anything else would just be dumb. But now you have the government retroactively changing things. If a company knew that would happen, of course they’d do things differently in the past. But they didn’t. Because it wasn’t wrong at the time. It’s like an entrapment feature of the government. Pure thievery.

hexclock

They must be running their accounting software on Windows. That would explain all the errors. 

welshdog

9secondkox2 said:

darkvader said:

9secondkox2 said:

This is theft. 

The government wants money. Solution? Just retroactively “adjust” someone’s taxes from years ago! A good solid decade ought to do it. 

Pure evil. If there was ac actual issue all this years ago, the IRS WOULD HAVE NOTIFIED THEM AND THEY COULD PAY WHAT WAS OWED. this isn’t that. This is an extortionist government. 

Microsoft didn’t do anything illegal. They took advantage of the way the tax systems were set up, like any smart company would do. 

The only theft is what Micro$oft did.  And the sad part is that a company with $136 billion in profits in 2022 only has to pay $29 billion in penalties for their decade of theft.

Minimizing tax burden by storing your money in a more favorable location (still within US jurisdiction) wasn’t illegal at the time. Retroactively making it so is just theft by the government. Pure and simple. “Adjustment” my left buttock! Microsoft didn’t do anything wrong. They looked at options available to them and utilized them. anything else would just be dumb. But now you have the government retroactively changing things. If a company knew that would happen, of course they’d do things differently in the past. But they didn’t. Because it wasn’t wrong at the time. It’s like an entrapment feature of the government. Pure thievery.

You don't know that "Microsoft didn’t do anything wrong.". No one has said they were doing anything illegal, they simply didn't do the tax dodging in a manner the IRS thinks is correct. There will be a back and forth and eventually a settlement will be reached. There is no reason to ever place any faith or belief in corporations doing the right thing, that's not how they operate. All desisions are based on what makes or saves the most money - period. Apple are slightly less guilty of that than some mega-corporations, but MSFT? Come on, they are not going to follow the law to the letter if they think they can get away with it. Gates' legacy of hacking and gaming everything, always and forever lives on.

9secondkox2

welshdog said:

9secondkox2 said:

darkvader said:

9secondkox2 said:

This is theft. 

The government wants money. Solution? Just retroactively “adjust” someone’s taxes from years ago! A good solid decade ought to do it. 

Pure evil. If there was ac actual issue all this years ago, the IRS WOULD HAVE NOTIFIED THEM AND THEY COULD PAY WHAT WAS OWED. this isn’t that. This is an extortionist government. 

Microsoft didn’t do anything illegal. They took advantage of the way the tax systems were set up, like any smart company would do. 

The only theft is what Micro$oft did.  And the sad part is that a company with $136 billion in profits in 2022 only has to pay $29 billion in penalties for their decade of theft.

Minimizing tax burden by storing your money in a more favorable location (still within US jurisdiction) wasn’t illegal at the time. Retroactively making it so is just theft by the government. Pure and simple. “Adjustment” my left buttock! Microsoft didn’t do anything wrong. They looked at options available to them and utilized them. anything else would just be dumb. But now you have the government retroactively changing things. If a company knew that would happen, of course they’d do things differently in the past. But they didn’t. Because it wasn’t wrong at the time. It’s like an entrapment feature of the government. Pure thievery.

You don't know that "Microsoft didn’t do anything wrong.". No one has said they were doing anything illegal, they simply didn't do the tax dodging in a manner the IRS thinks is correct. There will be a back and forth and eventually a settlement will be reached. There is no reason to ever place any faith or belief in corporations doing the right thing, that's not how they operate. All desisions are based on what makes or saves the most money - period. Apple are slightly less guilty of that than some mega-corporations, but MSFT? Come on, they are not going to follow the law to the letter if they think they can get away with it. Gates' legacy of hacking and gaming everything, always and forever lives on.

If that was so, it would have been caught the first year. The IRS watches big corporations like s hawk. 

They are even calling this an “adjustment.” Thst means the government is changing things now. That can be applied moving forward but should never be retroactive. That’s wrong. If the rules for a gamrr we change next year, you shouldn’t lose your trophy thst you won playing by the rules in years prior. 

mayfly

lam92103 said:

With 70 Billion of profit per year, 30 Billion sounds quite low for 10 years 

And it would be. But if you read the article, there's this: "Microsoft says that it has paid over $67 billion in taxes to the U.S. since 2004."

MplsP

9secondkox2 said:

welshdog said:

9secondkox2 said:

darkvader said:

9secondkox2 said:

This is theft. 

The government wants money. Solution? Just retroactively “adjust” someone’s taxes from years ago! A good solid decade ought to do it. 

Pure evil. If there was ac actual issue all this years ago, the IRS WOULD HAVE NOTIFIED THEM AND THEY COULD PAY WHAT WAS OWED. this isn’t that. This is an extortionist government. 

Microsoft didn’t do anything illegal. They took advantage of the way the tax systems were set up, like any smart company would do. 

The only theft is what Micro$oft did.  And the sad part is that a company with $136 billion in profits in 2022 only has to pay $29 billion in penalties for their decade of theft.

Minimizing tax burden by storing your money in a more favorable location (still within US jurisdiction) wasn’t illegal at the time. Retroactively making it so is just theft by the government. Pure and simple. “Adjustment” my left buttock! Microsoft didn’t do anything wrong. They looked at options available to them and utilized them. anything else would just be dumb. But now you have the government retroactively changing things. If a company knew that would happen, of course they’d do things differently in the past. But they didn’t. Because it wasn’t wrong at the time. It’s like an entrapment feature of the government. Pure thievery.

You don't know that "Microsoft didn’t do anything wrong.". No one has said they were doing anything illegal, they simply didn't do the tax dodging in a manner the IRS thinks is correct. There will be a back and forth and eventually a settlement will be reached. There is no reason to ever place any faith or belief in corporations doing the right thing, that's not how they operate. All desisions are based on what makes or saves the most money - period. Apple are slightly less guilty of that than some mega-corporations, but MSFT? Come on, they are not going to follow the law to the letter if they think they can get away with it. Gates' legacy of hacking and gaming everything, always and forever lives on.

If that was so, it would have been caught the first year. The IRS watches big corporations like s hawk. 

They are even calling this an “adjustment.” Thst means the government is changing things now. That can be applied moving forward but should never be retroactive. That’s wrong. If the rules for a gamrr we change next year, you shouldn’t lose your trophy thst you won playing by the rules in years prior. 

Hardly - there are many cases in which wrongdoing is discovered years later. Normally the statute of limitation for tax fraud is 7 years. The fact that this goes back much further indicates that it has been in the works for a while. 

timmillea

BlueLightning said:

Seems as if wealthy firms and individuals think white collar crime (including evading tax) is good, but they hate it when they experience blue collar crime, such as shoplifting, theft from employees, or smash and grabs.  I see no difference between the two, except the former is usually MUCH larger theft.  If they don't want blue collar crime, then pay the taxes and don't cheat customers.  

Twas always thus and always thus will be. 

Almost every in prison is poor and stupid. Even the rich and stupid evade prison because they can afford to employ good lawyers to get them out of their 'embarrassing predicaments'. 

AppleZulu

9secondkox2 said:

welshdog said:

9secondkox2 said:

darkvader said:

9secondkox2 said:

This is theft. 

The government wants money. Solution? Just retroactively “adjust” someone’s taxes from years ago! A good solid decade ought to do it. 

Pure evil. If there was ac actual issue all this years ago, the IRS WOULD HAVE NOTIFIED THEM AND THEY COULD PAY WHAT WAS OWED. this isn’t that. This is an extortionist government. 

Microsoft didn’t do anything illegal. They took advantage of the way the tax systems were set up, like any smart company would do. 

The only theft is what Micro$oft did.  And the sad part is that a company with $136 billion in profits in 2022 only has to pay $29 billion in penalties for their decade of theft.

Minimizing tax burden by storing your money in a more favorable location (still within US jurisdiction) wasn’t illegal at the time. Retroactively making it so is just theft by the government. Pure and simple. “Adjustment” my left buttock! Microsoft didn’t do anything wrong. They looked at options available to them and utilized them. anything else would just be dumb. But now you have the government retroactively changing things. If a company knew that would happen, of course they’d do things differently in the past. But they didn’t. Because it wasn’t wrong at the time. It’s like an entrapment feature of the government. Pure thievery.

You don't know that "Microsoft didn’t do anything wrong.". No one has said they were doing anything illegal, they simply didn't do the tax dodging in a manner the IRS thinks is correct. There will be a back and forth and eventually a settlement will be reached. There is no reason to ever place any faith or belief in corporations doing the right thing, that's not how they operate. All desisions are based on what makes or saves the most money - period. Apple are slightly less guilty of that than some mega-corporations, but MSFT? Come on, they are not going to follow the law to the letter if they think they can get away with it. Gates' legacy of hacking and gaming everything, always and forever lives on.

If that was so, it would have been caught the first year. The IRS watches big corporations like s hawk. 

They are even calling this an “adjustment.” Thst means the government is changing things now. That can be applied moving forward but should never be retroactive. That’s wrong. If the rules for a gamrr we change next year, you shouldn’t lose your trophy thst you won playing by the rules in years prior. 

The IRS has been intentionally underfunded for decades, specifically so that they lack the capacity to ‘watch big corporations like a hawk.’ It’s a bit willfully naïve not to recognize the likelihood that the scads of talented tax attorneys employed by big corporations would push the limits of loopholes to the extreme (and beyond) with the expectation that the IRS won’t catch things, nor have the capacity to do anything about it if they do. The reality is that this issue is probably just one of many more instances where big corporations have been coloring outside the lines with impunity. 

This is not an ex post facto change in the law. This is an audit finding that Microsoft did their taxes wrong. The “adjustment” refers not to a retroactive change in the law, but to a revision in what MS owes, based on the audit finding that they did their taxes wrong. 

Honkers

9secondkox2 said:

welshdog said:

9secondkox2 said:

darkvader said:

9secondkox2 said:

This is theft. 

The government wants money. Solution? Just retroactively “adjust” someone’s taxes from years ago! A good solid decade ought to do it. 

Pure evil. If there was ac actual issue all this years ago, the IRS WOULD HAVE NOTIFIED THEM AND THEY COULD PAY WHAT WAS OWED. this isn’t that. This is an extortionist government. 

Microsoft didn’t do anything illegal. They took advantage of the way the tax systems were set up, like any smart company would do. 

The only theft is what Micro$oft did.  And the sad part is that a company with $136 billion in profits in 2022 only has to pay $29 billion in penalties for their decade of theft.

Minimizing tax burden by storing your money in a more favorable location (still within US jurisdiction) wasn’t illegal at the time. Retroactively making it so is just theft by the government. Pure and simple. “Adjustment” my left buttock! Microsoft didn’t do anything wrong. They looked at options available to them and utilized them. anything else would just be dumb. But now you have the government retroactively changing things. If a company knew that would happen, of course they’d do things differently in the past. But they didn’t. Because it wasn’t wrong at the time. It’s like an entrapment feature of the government. Pure thievery.

You don't know that "Microsoft didn’t do anything wrong.". No one has said they were doing anything illegal, they simply didn't do the tax dodging in a manner the IRS thinks is correct. There will be a back and forth and eventually a settlement will be reached. There is no reason to ever place any faith or belief in corporations doing the right thing, that's not how they operate. All desisions are based on what makes or saves the most money - period. Apple are slightly less guilty of that than some mega-corporations, but MSFT? Come on, they are not going to follow the law to the letter if they think they can get away with it. Gates' legacy of hacking and gaming everything, always and forever lives on.

If that was so, it would have been caught the first year. The IRS watches big corporations like s hawk. 

They are even calling this an “adjustment.” Thst means the government is changing things now. That can be applied moving forward but should never be retroactive. That’s wrong. If the rules for a gamrr we change next year, you shouldn’t lose your trophy thst you won playing by the rules in years prior. 

If compelling evidence emerged years later that an athlete was using a performance enhancing drug to achieve success then I absolutely would expect them to be stripped of a trophy.

Nothing in law has been changed.  The proposed "adjustment" applies to how much Microsoft owes due to the conclusion of an audit.  If an audit couldn't adjust anything then there would be no purposes in auditing anything, ever.  That should be very apparent and it is disingenuous to suggest that the IRS is doing anything other than what they are there to do.