US telecommunications firm MCI, is in discussions with 18 states which are claiming that the former WorldCom Inc owes them some $750 million in back taxes.
The states claim that the company, which emerged from Chapter 11 bankruptcy protection last year, avoided paying income taxes by making units pay out much of their income in the form of royalties to the parent company for such assets as "management foresight."
MCI has recently agreed to settle with the state of Mississippi, where the firm had its headquarters, by paying $100 million in back taxes. It has also agree to hand over its empty facility in Jackson, Miss, to the state.
MCI has set aside reserves to settle outstanding claims arising from its bankruptcy filing and tax issues, and has some $5 billion in cash on its books.
Last week, the firm agreed to be acquired by Verizon Communications Inc.
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