Symantec's $1B Tax Bill
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It's true. Blockbuster mergers can sometimes come back to bite the buyer.
Security software giant Symantec said in a Securities and Exchange filing that it owes the government $1 billion in unpaid taxes, mostly relating to an audit of its purchase of Veritas Software.
Symantec, which has watched its shares drop since it purchased Veritas for $10.5 billion last summer, said the IRS is claiming that the company owes more taxes, plus interest and penalties, for 2000 and 2001.
Symantec said its tax liability with regard to the Veritas claim would be $900 million, excluding penalties and interest.
The Cupertino, Calif., company also said the IRS claim relates to transfer pricing in connection with a technology license agreement between Veritas and a foreign subsidiary.
Symantec said that the IRS informed the company that an unrelated audit of Symantec for fiscal years 2003 and 2004 could cost the company another $100 million in taxes, excluding penalties and interest.
These proposed adjustments also relate to transfer pricing between Symantec and a foreign subsidiary.
If the combined audits are borne out, Symantec would owe the government at least $1 billion.
Symantec Executive Vice President and CFO James A. Beer said in the filing that the company does not agree with the IRS's position and will oppose the assessments in tax court.
"The company strongly believes the IRS positions with regard to these matters are inconsistent with applicable tax laws and existing treasury regulations, and that its previously reported income tax provision for the years in question is appropriate," Beer said.
He added that Symantec will not pay the IRS based on the assessment until the issue is resolved.
If Symantec is required to pay an amount in excess of its provision, he said, the incremental amounts due would be accounted for as additions to the company's purchase price for Veritas.