Microsoft Sues IRS Over Hiring of Attorney Boies

Why has the IRS engaged Microsoft's nemesis David Boies? The software giant is going to court to get the answer.
Matthew HellerJune 2, 2015
Microsoft Sues IRS Over Hiring of Attorney Boies

In the latest legal salvo over an Internal Revenue Service audit, Microsoft has sued the agency seeking information about its hiring of an old nemesis — high-profile attorney David Boies.

The IRS is currently conducting an examination of Microsoft’s federal income tax returns for the tax years ended June 30, 2004, through June 30, 2009. It has said the audit could result in “tens of billions” in corporate tax liability.

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David Boies

David Boies

In a lawsuit filed last week, Microsoft has asked a Seattle federal judge to enforce its public-records request for documents on the IRS’ decision to enter into a contract with Boies’ firm, Boies Schiller & Flexner LLP, in 2013.

Boies represented the government in its historic antitrust case against Microsoft, which almost resulted in the breakup of the company. According to Micrsoft, the contract paid Boies Schiller up to $350,000, with Boies himself getting $1,250 an hour.

In an IRS filing in a related case, Bloomberg reports, the agency said the contract was for ‘‘expert services” and is “related to assisting the IRS in its examination of Microsoft.”

Microsoft alleges the IRS has wrongfully withheld records concerning Boies’ engagement that it has requested under the Freedom of Information Act.

“We’re pleased the IRS provided the documents requested by one of our previous FOIA suits and hope this additional suit helps complete the information we need to further understand the government’s process,” David Cuddy, a Microsoft spokesman, said in a statement.

In its most recent quarterly securities filing, Microsoft said the IRS in February 2012 reopened the audit of tax years 2004 through 2006 and is still auditing tax years 2007 through 2014. The company said the case could have a “significant adverse impact,” though it doesn’t expect a final resolution within the next year.

The most significant issue, Bloomberg said, relates to whether Microsoft has used transfer pricing, or intracompany transactions that are supposed to be conducted as arm’s length deals, to shift profits to low-tax or no-tax countries, instead of paying at the 35% U.S. rate

Microsoft has also sued for access to records of the IRS’ retention of another law firm, Quinn Emanuel Urquhart & Sullivan LLP, on a $2.2 million contract.

Image: Flickr, David Shankbone, CC BY 2.0