Appeals court shoots down Medtronic win in IRS feud

A federal appeals court yesterday shot down a U.S. Tax Court decision in a longrunning transfer prcing dispute between Medtronic (NYSE:MDT) and the Internal Revenue Service.
The IRS maintains that Fridley, Minn.-based Medtronic owes $1.4 billion in back taxes for transfer pricing arrangements among the company’s various units during the tax years 2005 and 2006. In transfer pricing, income is allocated among branches in different countries. It’s a legal tax maneuver companies can use to attribute profits from a product made and sold in the U.S. to a unit in a foreign country.
The federal tax bureau claimed Medtronic owed income tax of $548.2 million for 2005 and $810.3 million for 2006; Medtronic disputed the $1.34 billion bill and took the case to the U.S. Tax Court. In June 2016, a federal tax judge found for the company, ruling that Medtronic proved that the IRS was “arbitrary, capricious, or unreasonable” in its interpretation of the transfer pricing for its Puerto Rico subsidiary. Medtronic has said it expects to repatriate between $500 million and $4.5 billion in overseas cash once the dispute is put to bed.
The tax court later ruled that Medtronic owed some $26.7 million for the 2005 tax year but had overpaid by nearly $12.5 million the next year, leaving a tax tab of just $14.3 million. IRS commissioner John Koskinen’s office appealed to the U.S. Court of Appeals for the Eighth Circuit, arguing that the tax court was mistaken to use Medtronic�...

Source: Mass Device - August 17, 2018 Category: Medical Devices Authors: Brad Perriello Tags: Legal News Wall Street Beat Medtronic U.S. Internal Revenue Service (IRS) Source Type: news