8-KOther Events

BOSTON SCIENTIFIC CORP 8-K Report, Corporate Update (Jul 20, 2016)

Filed July 20, 2016For Securities:BSX

Summary

Boston Scientific Corporation (BSX) announced on July 19, 2016, that it has entered into a Stipulation of Settled Issues with the Internal Revenue Service (IRS) to resolve a significant transfer pricing dispute. This settlement covers tax years 2001 through 2006 for the former Guidant Corporation and 2006 through 2007 for BSX, which were before the U.S. Tax Court. It also addresses issues with the IRS Office of Appeals for BSX's 2008 through 2010 tax years. The proposed settlement is contingent on the IRS applying the same settlement basis to subsequent tax years (2008-2010) and potential review by the Joint Committee on Taxation. If finalized, the company expects to make net tax payments of approximately $275 million, plus accrued interest, over the next 12 to 24 months. Importantly, BSX had already established sufficient reserves for this dispute and does not anticipate recognizing additional charges or changing its estimated annual effective tax rate for 2016.

Key Highlights

  • 1Boston Scientific has reached a settlement with the IRS regarding transfer pricing disputes for tax years 2001-2007 (Guidant and BSX) and 2008-2010 (BSX).
  • 2The settlement resolves controversies before the U.S. Tax Court and the IRS Office of Appeals.
  • 3A net tax payment of approximately $275 million, plus interest, is expected if the settlement is finalized.
  • 4Payments are anticipated within the next 12 to 24 months.
  • 5The company had previously recorded adequate reserves, meaning no additional charges are expected from this resolution.
  • 6The settlement is not expected to impact the company's 2016 estimated annual effective tax rate.
  • 7The settlement's finalization is subject to certain IRS review processes and the consistent application of the settlement terms to future tax years.

Frequently Asked Questions

This filing addresses a settlement agreement between Boston Scientific and the IRS to resolve long-standing transfer pricing disputes for tax years 2001 through 2010. These disputes involved the former Guidant Corporation and Boston Scientific itself.

The company expects to make net tax payments of approximately $275 million, plus interest, if the settlement is finalized. However, BSX has already set aside sufficient reserves for this matter, so no additional charges are anticipated, and the 2016 effective tax rate is not expected to change.

Boston Scientific expects to remit the tax and interest payments within the next 12 to 24 months, contingent upon the finalization of the settlement and satisfaction of related conditions.

Yes, the settlement is contingent upon the IRS Office of Appeals applying the same settlement basis to all transfer pricing issues for BSX's 2008-2010 tax years and potential review by the Joint Committee on Taxation. There is also a risk that these conditions may not be met, or that the IRS may not consistently apply the settlement terms to future tax returns.