Symantec Corp. has announced that an agreement in principle has been reached with the US Internal Revenue Service to settle an outstanding claim concerning the audit of the company's 2003 and 2004 fiscal years, but the firm indicated that it intends to fight a much larger tax claim which totals almost $1 billion.
The company, which makes the popular Norton anti-virus software, expects to settle the first outstanding tax obligation for $36 million, excluding interest. This is substantially lower than the original IRS assessment of approximately $100 million.
On April 17, 2006, Symantec disclosed that the company received notices of proposed adjustment from the IRS in connection with an ongoing audit of Symantec's 2003 and 2004 fiscal years. The IRS claimed that the company owed an incremental tax liability of approximately $100 million, excluding penalties and interest, primarily related to transfer pricing matters between Symantec and a foreign subsidiary.
The company anticipates that it will finalize the settlement with the IRS by the end of June 2006, and it expects that this cash settlement will be reflected on the June quarter balance sheet.
Symantec also revealed that it is forging ahead with an appeal against a separate IRS claim concerning a tax audit of Veritas Software Corp., which the company acquired in July 2005.
According to a recent filing with the Securities and Exchange Commission, Symantec reported that it had received a Notice of Deficiency from the IRS on March 29, 2006, which claimed that the company owes $900 million in additional taxes, plus interest and penalties, for the 2000 and 2001 tax years.
The back tax claim also relates to transfer pricing in connection with a technology license agreement between Veritas and a foreign subsidiary.
Symantec stated that it "strongly believes" that the IRS claim is "inconsistent with applicable tax laws and existing Treasury regulations" and intends to pursue the matter in the US Tax Court.
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