The U.S. Internal Revenue Service hit Boston Scientific (NYSE:BSX) with another huge tax bill over its 2006 acquisition of pacemaker firm Guidant Corp.
The latest tab, for $581 million plus interest and penalties, comes out of an IRS audit of Guidant’s books for 2004 through 2006, according to a regulatory filing.
As with two other disputes between Boston Scientific and the taxman, the latest IRS "Notice of Deficiency" concerns the agency’s tally of transfer pricing between domestic and foreign Guidant subsidiaries. But the new bill also includes charges related to a 2006 deal in which Abbott (NYSE:ABT) bought Guidant’s stent business from BSX, according to the filing.
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"We do not agree with the transfer pricing methodologies applied by the IRS or its resulting assessment and we believe that the IRS has exceeded its authority by attempting to adjust the terms of our negotiated third-party agreement with Abbott," Boston Scientific said. "We believe that we have meritorious defenses for our tax filings, that the IRS positions with regard to these matters are inconsistent with the applicable tax laws and the existing Treasury regulations, and that the previously reported income tax for the years in question is appropriate."
It could take several years to settle the dispute, the company added, noting that it believes it has sufficient income tax reserves to avoid "a material impact on our financial condition or results of operations."
In December 2010, the IRS dunned BSX for more than half a billion dollars – again plus interest – to settle Guidant’s tax bill from 2001, 2002 and 2003. In September the IRS hit BSX with another $154 million bill for 2006 and 2007.
