Scarinci Hollenbeck, LLC
The Firm
201-896-4100 info@sh-law.comFirm Insights
IRS Scores $13 Million Victory Against BMC Software
Author: Scarinci Hollenbeck, LLC
Date: October 2, 2013
Key Contacts
Back
The Internal Revenue Service landed a huge victory in U.S. Tax Court recently, and the ruling may have significant implications for multinational companies who have profits abroad.
The court ruled that BMC Software will be forced to pay $13 million – plus penalties and interest – to the IRS in relation to a dispute about a 2004 corporate income tax repatriation holiday. The controversial tax holiday allowed multinational companies holding funds offshore to bring those into the United States at a reduced tax rate of 5.25 percent, rather than the 35 percent statutory rate. The corporate tax holiday was designed to encourage multinational firms with significant holdings to bring those resources into the U.S. and invest in the domestic economy.
Under the tax holiday, BMC repatriated roughly $717.2 million. However, the IRS argued that during this period, BMC was also engaging in transfer pricing abuses by shifting profits from high tax countries to low tax countries, and then stockpiling these funds without paying taxes on them, Forbes reports. The IRS and BMC settled the pricing transfer issues – but because the company’s U.S. profits increased under the settlement, the IRS asserted that more taxes were owed under the tax holiday provision.
While the company argued that the pricing transfer settlement and the repatriation tax law were not related, the tax court took a different stance.
“The Commissioner and the taxpayer were bound to treat the payment as a return of principal for all Federal income tax purposes and the repayment was no longer a dividend. In short, we did not permit inconsistent characterizations for Federal income tax purposes,” according to Judge Diane Kroupa’s court opinion.
Other multinational firms are expected to face similar scrutiny from the IRS in the coming months, including Massachusetts-based Analog Devices.
- Practices: Tax and Trusts & Estates, Corporate Transactions & Business
- Locations: Red Bank, NJ, New York City, Little Falls, NJ
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Related Posts
See all
Arbitration vs. Litigation vs. Mediation: What New Jersey Businesses Should Know Before Signing a Contract
Arbitration resolves disputes privately before an arbitrator whose decision is usually final, while litigation resolves them in court with full rights of appeal. Whether a business ends up in arbitration or litigation is often decided when it signs the contract, long before any dispute arises. Key Takeaways When facing a contract dispute, carefully consider your […]
Author: Graham Staton
Can You Own Part of a New Jersey Business Without a Written Agreement?
Can you own part of a business in New Jersey without a written agreement? Yes, it is possible. Under New Jersey’s Uniform Partnership Act, a partnership can arise when two or more people carry on a business as co-owners for profit, whether or not they ever intended to form one. Ownership doesn’t necessarily depend on […]
Author: Michael Mietlicki
Crisis-Proofing Your New Jersey Business: Building a Crisis Response Plan Before You Need One
For New Jersey businesses, crisis preparedness should be viewed as a legal and operational function, not simply an emergency-management exercise. A well-designed crisis response plan can help preserve evidence, protect confidential communications, meet reporting obligations, limit unnecessary exposure, and prevent an already difficult situation from becoming a larger legal problem. Key Takeaways A serious crisis […]
Author: Sean M. Pena
Monmouth County's Next Development Wave: What Developers and Investors Need to Know
Monmouth County is entering a significant new phase of development. For those looking to acquire property or undertake a new project, understanding the market opportunity is only the beginning. The more important question is whether a particular property can actually be developed as contemplated and what approvals, agreements, and other conditions will be required to […]
Author: Donald M. Pepe
Are Your Conversations with AI Shielded from Discovery? Courts Are Split
Whether a client’s prompts to a generative AI tool and the documents it produces are protected from disclosure depends on the case type, who claims protection, and whether counsel was involved. In United States v. Heppner, a New York federal judge ruled that a criminal defendant’s communications with an AI platform were protected by neither […]
Author: Chris Seelinger
Guardianships in New Jersey: When a Loved One Can No Longer Manage Personal or Financial Affairs
When a family member can no longer make important decisions for themself, the question is often not whether the family will step in, but whether they have the legal authority to do so. A spouse may manage household finances, or an adult child may arrange medical care and pay bills. Still, informal assistance does not […]
Author: Marc J. Comer
No Aspect of the advertisement has been approved by the Supreme Court. Results may vary depending on your particular facts and legal circumstances.
Sign up to get the latest from our attorneys!
Explore What Matters Most to You.
Consider subscribing to our Firm Insights mailing list by clicking the button below so you can keep up to date with the firm`s latest articles covering various legal topics.
Stay informed and inspired with the latest updates, insights, and events from Scarinci Hollenbeck. Our resource library provides valuable content across a range of categories to keep you connected and ahead of the curve.