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The IRS Hits Symantec with a $1 Billion Tax Bill
GnoWay writes "Macworld is reporting that the IRS has charged Symantec Corporation with about a 900 million dollar tax bill due to the charge that Symantec and Veritas (purchased by Symantec last year) under-reported the value of intellectual property which they had transferred to their two Irish subsidiaries. Another $100 million is connected to Symantec's 2003 and 2004 reports."
In unrelated news, the IRS has reported sudden loss of all their backups, and serious infection from computer viruses.
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under-reported the value of intellectual property
I doubt it, hell, you might need a rebate
A billion dollars for intellectual property? Gosh, that's like charging $750 for copying one song... Seriously, though, how does one value these things? For that matter, what intellectual property is this? The article is rather vague.
This sig has absolutely no significance and serves only to take up screen space and waste the time of the reader.
From the article the 900 million is "in connection with the Veritas claim, which covers the 2000 and 2001 Veritas tax returns" So symantec basicly got screwed in the whole deal , bought a company then has to pay their debts from 5 years ago. That sucks.
If a $900M bill from the IRS doesn't count as getting fucked, I don't know what does.
I used to work for veritas and got out shortly after the buyout. Veritas was a cool place to work. And when symantec took over, they sent out this 1/4" thick book full of management-speak. It was unreal. "What is winning?" "We believe in unity." "Our customers trust us to lead the way." After all of this, they listed the names of every employee from either company. Then they had a company-wide conference call with the new ceo. They had "questions from employees" dolled out by a pretty-sounding secretary type. One of the questions was "what can I do to be a better employee?" "You know, I'm being asked that all the time..." I nearly vomited. Ahead of their exit interview, they send you this questionaire to fill out planning to go ever it with you later. After I sent it back to them, they didn't want to have an exit interview anymore... something about how the ceo on the conference call sounded like a lord trying to placate the serfs. :-) I still have the book as a joke, and as a reminder of why, yet again, I've become a consultant and vow never again to be a wage-slave. I shudder to think about what it costs to print up 20,000 of these shiny black books. If they were trying to buy my loyalty with bull-shit management wrapped in a shiny package, they would have bought more loyalty by simply sending me a check for the printing cost of my little book.
I hear their stock has dropped by 1/3 since the buyout. I'm glad I didn't hang around for the stock options.
Disconnect your television. Do your own research. Draw your own conclusions. They're probably lying. Don't be a sheep.
It will be tied up in Tax Court (where corporations appeal decisions like this) for years.
Fixed.
(we peons simply go to directly pound-me-in-the-ass-prison -- do not pass go, do not collect dropped soap)
Transfer pricing is how companies allocate revenues and expenses across borders. Because an inter-company transaction isn't arms-length (nor at presumed fair market value), companies can play games with the prices at which goods are transfered between related parties. You try to shift income (minimize revenue, maximize expense) out of countries with high taxes, and into countries with lower taxes.
BTW, this is the same idea that underlies SALT strategizing (State and Local Tax). You move income out of states with high taxes (NY), and into states with low/no taxes (FL). That is why you'll see cost centers (backoffice) in low-tax states. The company then "charges" the revenue-generating units for use of these services, and income is shifted from the revenue units (high tax locations) into cost centers (low tax locations)
Here, it looks like Veritas licensed software (IP) to a subsidiary in Ireland, and at a transfer price that the IRS thought was too low (below market). The IRS is claiming that Vertias-U.S. should have recognized greater licensing revenue than they did, and as a result, they underreported their income. Complexities of international tax treaties aside, it could be because they wanted to leave more income in Ireland (lower expense for the Ireland sub), which might have had a lower tax rate. Or timing, or US vs IRE tax credits, or deductibility or software expensing/amortization, or witholding, or offsets with other subs, or phases of the moon, etc.
From the 8-K, "The Notice of Deficiency primarily relates to transfer pricing in connection with a technology license agreement between VERITAS and a foreign subsidiary."
From a news article: "Genevieve Haldeman, Symantec's vice president of corporate communications, ...explained that the notices related to transfer pricing of intellectual property, in effect licensing technology from the Symantec parent company to its Irish affiliate to sell outside of the Americas."
"Effectively what the IRS is saying is that separately both Symantec and Veritas undervalued the technology license that was used in the international subsidiary," she said. "They believe it should be valued at a higher rate, and given their valuation, we owe additional taxes."