Summary
Microsoft Corporation (MSFT) announced on October 11, 2023, that it has received Notices of Proposed Adjustment (NOPAs) from the Internal Revenue Service (IRS) concerning tax years 2004 through 2013. The IRS is asserting a potential additional tax liability of $28.9 billion, plus penalties and interest, primarily related to intercompany transfer pricing. While Microsoft disagrees with the IRS's proposed adjustments and intends to vigorously contest them through administrative appeals and potentially judicial proceedings, the company believes its current allowances for income tax contingencies are adequate as of September 30, 2023. Management does not anticipate a significant change to these contingencies within the next 12 months and does not expect a final resolution of these matters within that timeframe.
Key Highlights
- 1Receipt of IRS Notices of Proposed Adjustment (NOPAs) for tax years 2004-2013.
- 2IRS is proposing an additional tax payment of $28.9 billion, plus penalties and interest.
- 3The core issue raised by the IRS pertains to intercompany transfer pricing.
- 4Microsoft disagrees with the IRS's proposed adjustments and plans to contest them.
- 5The company believes its current tax contingency allowances are adequate.
- 6No significant change to tax contingencies is anticipated within the next 12 months.
- 7A final resolution of these tax issues is not expected within the next 12 months.