Boston Scientific (NYSE:BSX) said it agreed yesterday to pay the U.S. Internal Revenue Service $275 million plus interest to settle a tax beef dating back to its $26 billion acquisition of Guidant in 2006.
The settlement would put to bed a transfer pricing dispute with the IRS over the agency’s tally of transfer pricing between domestic and foreign Guidant subsidiaries, plus charges related to a 2006 deal in which Abbott (NYSE:ABT) bought Guidant’s stent business from Boston Scientific.
The deal would settle the transfer pricing issue before the IRS Office of Appeals and a related case in the U.S. Tax Court for Guidant’s 2001 through 2006 tax years and 2006 and 2007 for Boston Scientific, the Marlborough, Mass.-based company said in a regulatory filing. The IRS appeals board must agree to apply the same basis to transfer pricing issues for 2008 through 2010, and the deal could be subject to review by the Joint Committee on Taxation in Congress, the company said.
“If finalized, the settlement would resolve substantially all aspects of the controversy before the Tax Court described above as well as the Company’s transfer pricing issues before IRS Appeals. In addition, the Company believes the basis of the settlement provides a framework that can be consistently applied by the IRS to all of the Company’s U.S. income tax returns filed subsequent to 2010,” Boston Scientific said.
The settlement is not expected to result in any additional charges and shouldn’t affect Boston’s estimated tax rate, the company said. The payments are slated to be made over the next 12 to 24 months, it said.
The deal is a bargain for Boston Scientific, which faced at least $1.26 billion in bitterly disputed transfer-pricing charges from the IRS. The controversy dates back to late 2010, when the IRS slapped Boston Scientific with a $525 million tax bill over the Guidant transfer pricing. The federal tax bureau hit BSX with another $154 million dunning in September 2011, followed by a $581 million tab in December of that year.
The company isn’t the only medical device giant with an IRS beef. Last year, Medtronic (NYSE:MDT) took a nearly $330 million charge to cover an IRS settlement related to its $4.2 billion acquisition of Kyphon in 2007. Last month a federal judge found for Medtronic in a lawsuit against the tax agency involving transfer pricing among its units during 2005 and 2006. The IRS claimed Medtronic owed $548.2 million for 2005 and $810.3 million for 2006, for a total bill of $1.36 billion.
The post Boston Scientific to settle IRS beef for $275m appeared first on MassDevice.