IRS Seeks $525.1M from Boston Scientific
The Internal Revenue Service (IRS) is seeking $525.1 million, plus interest, from Boston Scientific Corporation.
Last week, the Natick, Massachusetts-based medical-device giant received notices of deficiency from the IRS, which claimed that it owes additional taxes based on an audit of subsidiary Guidant Corporation's 2001, 2002, and 2003 tax years.
Boston Scientific paid $27.2 billion to acquire Arden Hills-based Guidant in 2006. According to Boston Scientific, the issue under dispute relates to “transfer pricing in connection with technology license agreements between certain domestic and foreign subsidiaries of Guidant.”
“We do not agree with the transfer pricing methodologies applied by the IRS or its resulting assessment,” Boston Scientific said in a recent filing with the U.S. Securities and Exchange Commission. “The company believes that the IRS positions with regard to these matters are inconsistent with the applicable tax laws and the existing [U.S.] Treasury regulations and that the previously reported income tax for the years in question is appropriate.”
Boston Scientific said that it plans to contest the IRS assessment, adding that no payments would be required until the dispute is resolved, which could take several years.
The company said that its income tax reserves are “adequate” and that the final resolution in the matter will not have a material impact on its financial condition or operations.
This isn't the first time that Guidant has posed problems for Boston Scientific. In February, Guidant was charged by the U.S. Department of Justice for allegedly concealing information from federal regulators regarding “catastrophic failures in some of its life-saving devices.”
Boston Scientific said in November 2009 that it would pay $296 million in connection with the charges, but a federal judge rejected that settlement agreement in April. That leaves the two parties with several options: They could come up with a new agreement, Guidant could plead guilty and go to court, or the government could decide to prosecute instead of forming a new agreement.
Boston Scientific's 2009 revenue totaled $2.1 billion.