Boeing Denied $419 Million Tax Refund

by Leroy Baker, Tax-News.com, New York

06 March 2003

US aircraft manufacturer Boeing was dealt a blow by a US Supreme Court ruling this week that said the IRS did not owe the company $419 million in tax refunds.

Boeing brought the case to court after arguing that a government rule concerning the spreading of research costs across all of its output had prevented the firm making use of full tax breaks.

The panel of judges voted 7-2 in favour of the IRS, which argued that the billions Boeing spent on R&D in the 1980s had been improperly applied to a tax break that was designed to boost export growth.

A spokeswoman for Boeing denied that the ruling would have a negative impact on the company's financial results, though she conceded: "We're obviously very disappointed in the decision," adding, "we thought we had a strong case, but clearly we respect the opinion of the court."

The ruling looks likely to affect a plethora of other firms which have similar cases pending. Fred Murray, of the Tax Executives Institute which represents 2,800 companies, was pessimistic about the ruling, according to a Seattle Times report, and said "It's a disappointing day, I think, for the export community."

The judgement by the 9th US Courts Circuit of Appeals overturned a previous decision where the IRS was ordered to refund the $419 million to Boeing following a company audit.

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