IRS Says Motorola Owes $500 Million Additional Tax Liability
Motorola Inc. is disputing an Internal Revenue Service contention that the company owes $500 million in additional tax liability for the years 1996 through 2000.
The telecommunications company said that the IRS examined its tax returns in June and proposed several changes, mainly connected with transfer pricing, according to the Wall Street Journal. Motorola, in a Wednesday filing with the Securities and Exchange Commission, said it will dispute the findings.
The IRS believes the company should record an additional $1.4 billion in earnings for the years in question. The IRS may demand similar changes for years following 2000, the company said.
In a separate matter, Motorola also said in its SEC filing that the Indian Supreme Court stayed an order stopping the company from taking any assets out of India until millions of dollars are deposited with the Bombay High Court pending a trial involving Iridium India Telecom Ltd. The Indian Supreme Court in July reduced the amount that must be deposited from $120 million to $44 million.
Iridium India alleges in a civil lawsuit that Motorola acted deceptively in its dealings with Iridium LLC, a satellite-based telephone service financially backed by Motorola prior to its 1999 bankruptcy, the Journal reported. Iridium India had purchased rights from Iridium LLC for the development of the Iridium system in South Asia.
Iridium LLC's $5 billion in assets were eventually purchased by an unaffiliated investment group named Iridium Satellite LLC for $25 million. Iridium India is demanding more than $200 million in damages and interest from Motorola. In April, the Bombay High Court issued the order restraining the company from removing assets until a deposit is made with the court.