IRS says Microsoft may owe more than $29 billion in back taxes; Microsoft disagrees

SAN FRANCISCO (AP) — The Internal Revenue Service says Microsoft owes the U.S. Treasury $28.9 billion in back taxes, plus penalties and interest, the company revealed Wednesday in a securities filing.

That figure, which Microsoft disputes, stems from a long-running IRS probe into how Microsoft allocated its profits among countries and jurisdictions in the years 2004 to 2013. Critics of that practice, known as transfer pricing, argue that companies frequently use it to minimize their tax burden by reporting lower profits in high-tax countries and higher profits in lower-tax jurisdictions.

Microsoft, which is based in Redmond, Washington, said it followed IRS rules and will appeal the decision within the agency, a process expected to take several years. The company’s shares dropped slightly in aftermarket trading, falling $1.42 to $331.