New York (Aug. 18, 2003) -- When is a tax break not a tax break? When the government tries to take it back -- and it looks like that's what the Internal Revenue Service is trying to do to Intel Corp.
Early in 2000, the IRS gave the chip giant a $600 million tax benefit for export. But in the company's quarterly filing with the Securities and Exchange Commission last week, it reported that the IRS wants to adjust its tax benefit by $600 million -- plus interest, according to a story in Cahners Business Report. The proposed adjustment came to light after a routine exam of Intel's tax returns for 1999 and 2000, the company said.
And this may not be the end of the story. Intel warned the IRS might make similar claims in future audits, Intel warned. The tax benefit relates to credits taken for exporting goods or, in this case, chips, overseas. While the chips are made in the U.S., they are tested and assembled in products overseas. The IRS apparently interprets this as constituting overseas manufacturing, as opposed to the export of a finished product.
"The company disputes the proposed adjustments and intends to pursue this matter through applicable IRS and judicial procedures, as appropriate," Intel stated in its quarterly report. "Although the final resolution of the proposed adjustments is uncertain, based on currently available information, management believes that the ultimate outcome will not have a material adverse effect on the company’s financial position, cash flows or overall trends in results of operations."
-- WebCPA staff
