Koch Industries Inc. has filed a lawsuit, claiming that the Internal Revenue Service used improper accounting to calculate taxes for a 1998 New Mexico highway project.

The $20 million lawsuit was filed in March, and came to light this past week, when Koch filed an order to suspend the gathering of evidence in the case while it pursues the sale of a business entity.

The New Mexico contract, signed with Koch subsidiary Mesa PDC LLC, called for the company to continue work on the highway for up to 20 years after the project was completed.
The company treated the contract as a long-term deal and used the “percentage of completion" method to calculate the income on which taxes were paid -- allowing Koch to report income as it incurred over the years.

Following a three-year audit of several Koch subsidiaries, the IRS told the company to change its books to the accrual method. Though Koch paid the taxes, it later sought a refund from the IRS.


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