Summary
Boston Scientific Corporation (BSX) has filed an 8-K report to announce the final resolution of significant transfer pricing disputes with the Internal Revenue Service (IRS) for tax years spanning from 2001 to 2010. This settlement, which was finalized on May 30, 2018, after a lengthy process involving the U.S. Tax Court and the Joint Committee on Taxation, will result in net tax payments of approximately $608 million (including $303 million in taxes and $305 million in interest). The company expects to record a significant previously unrecognized tax benefit of $225 million to $250 million in the second quarter of 2018 due to this resolution. Furthermore, BSX anticipates concluding its IRS examination for the 2011-2013 tax years by the end of 2018, expecting to apply the same transfer pricing methodologies and not recognize additional charges, as sufficient reserves are believed to be in place. The company does not foresee any impact on its 2018 estimated annual effective tax rate from these settlements. Investors should note the potential financial impact of the tax payments and the recognition of tax benefits, as well as the company's outlook on future tax examinations.
Key Highlights
- 1Final resolution of IRS transfer pricing disputes for tax years 2001-2010 reached on May 30, 2018.
- 2Total net tax payments expected to be approximately $303 million, plus an estimated $305 million in net interest.
- 3Payment of these liabilities is expected within the next three months.
- 4Company expects to record a previously unrecognized tax benefit of $225 million to $250 million in Q2 2018.
- 5IRS examination for 2011-2013 tax years expected to conclude by year-end 2018 using the same transfer pricing methodologies.
- 6No additional charges anticipated for the 2011-2013 tax years resolution.
- 72018 estimated annual effective tax rate is not expected to change due to these settlements.