Marriott Settles ESOP Dispute with IRS

The hotel chain will pay $220 million in taxes and interest.
Alan RappeportJune 8, 2007

Marriott International said Friday that it has reached a $220 million settlement with the Internal Revenue Service and the Department of Labor following an IRS examination of its employee stock ownership plan.

The after-tax charge will total $54 million, or 13 cents per share, and reduce shareholder equity by $114 million in the second quarter, the company said.

“We are pleased to reach this compromise, bringing this dispute to a swift and final resolution using the IRS’s Fast Track Settlement process,” Arne M. Sorenson, Marriott’s executive vice president and CFO, said.

Drive Business Strategy and Growth

Drive Business Strategy and Growth

Learn how NetSuite Financial Management allows you to quickly and easily model what-if scenarios and generate reports.

Marriott reported that it received a Notice of Proposed Adjustment from the IRS on March 1, 2007 that challenged most of the ESOP-related federal income-tax deductions claimed by the company.

Facing proposed taxes and penalties on those deductions, Marriott said at the time: “We believe that the IRS’ proposed adjustments are incorrect, intend to vigorously defend our positions and are examining various procedural alternatives for resolution of this matter.”

As a result of the settlement, Marriott will make cash payments to the U.S. Treasury and state tax jurisdictions, reflecting taxes and interest but no penalties.