Microsoft said in a filing with the U.S. Securities and Exchange Commission that it owes the Internal Revenue Service $28.9 billion in taxes.
In the filing, Microsoft said it disagrees with the notice of proposed adjustment (NOPA) it got from the IRS.
"We disagree with the proposed adjustments and will vigorously contest the NOPAs through the IRS’s administrative appeals office and, if necessary, judicial proceedings," Microsoft said. "We do not expect a final resolution of these issues in the next 12 months. Based on the information currently available, we do not anticipate a significant increase or decrease to our tax contingencies for these issues within the next 12 months."
Microsoft said that it received the notice of proposed adjustment for tax years 2004 through 2013 in late September. Microsoft said the IRS questioned how it allocated its income and expenses beginning in 2004.
IRS outlines intended targets for enhanced audits
The IRS is vowing "improved equity in audits" amid questions on whether new agents would be used to audit working-class taxpayers.
Microsoft said it has changed its practices for reporting income and expenses in recent years, which it says explains why the notice did not include tax returns in the last decade.
"Many large multinationals use cost-sharing because it reflects the global nature of their business. Because our subsidiaries shared in the costs of developing certain intellectual property, under those IRS cost-sharing regulations, the subsidiaries were also entitled to the related profits," Microsoft said.
According to government filings, Microsoft ended the 2023 fiscal year with $56.2 billion in revenue and $20.1 billion in net income.
