Highlights
The IRS claims that Microsoft owes approximately $28.9 billion in taxes, penalties, and fines.
Microsoft has a track record of engaging with regulatory authorities, facing penalties for unlawfully gathering children's data and neglecting to promote alternative web browsers.
Despite the challenges posed by regulations, Microsoft is determined to finalize the Activision deal before October 13. However, should the deal collapse, the company will incur a breakup fee of $4.5 billion.
The IRS has asserted that Microsoft owes approximately $28.9 billion in taxes, including additional penalties and fines. This claim comes at a critical moment as Microsoft is finalizing its $68.7 billion Activision deal.
Microsoft is no stranger to grappling with various regulatory bodies worldwide. In June 2023, the US FTC fined Microsoft $20 million for unlawfully collecting children's personal data through Xbox. Similarly, in 2013, the European Commission imposed a $731 million fine on the tech giant for its failure to promote alternative browsers in Windows 7. Now, the IRS has issued a notice to Microsoft demanding a substantial tax payment, potentially leading to significant challenges for the company.
In an official blog post on Microsoft’s website, the company provided a glimpse into the dispute at hand and its subsequent plans of action. The subject revolves around Microsoft's income and expense allocations between the years 2004 and 2013, which have drawn attention from the IRS. Microsoft revealed that it has been engaging with the regulatory body to address these concerns; however, conflicting views and explanations have arisen. Consequently, the IRS issued a series of Notices of Proposed Adjustment to Microsoft, asserting that the company owed an additional $28.9 billion in taxes and fines for the period between 2004 and 2013. Despite this notice, Microsoft remains adamant in its refusal to accept the claims and intends to appeal the decision, recognizing that the resolution process may span across several years. Additionally, Microsoft emphasized its consistent adherence to lawful practices and highlighted its contribution of over $67 billion in taxes to the US since its establishment.
Via: Microsoft
The Activision Blizzard acquisition attracted worldwide attention from major regulatory authorities, including the European Commission, UK's CMA, and the US FTC. Notably, investigations were conducted by these authorities. The EU approved the acquisition, but initially, the CMA moved to block Microsoft's attempt. Furthermore, the FTC issued a legal notice, sparking a lengthy court battle.
Despite these challenges, reports indicate that Microsoft plans to finalize the Activision deal by October 13, 2023. However, if the deal fails to materialize before the October 18 deadline, Microsoft will be obligated to pay a substantial breakup fee of $4.5 billion.
Source: Microsoft
