Reports are that MCI, formerly WorldCom Inc., is close to a settlement that would pay out $315 million to 14 states and the District of Columbia in order to settle back tax claims.
The states have accused MCI of illegally shielding billions of dollars from state taxes between 1999 and 2002 using a royalty tax plan created by Big Four firm KPMG. The states alleged that the tax plan allowed MCI to charge subsidiaries $24 billion for management expertise -- defining the payments as royalties and shielding the income from state taxes.
The telecommunications company, the No. 2 long-distance carrier in the country, doubled its original settlement offer to $300 million for the states and Washington in January, but talks have continued as MCI haggled over an agreement barring the states from pursuing criminal charges against individuals.
Under the preliminary agreement, New Jersey would receive the largest amount, more than $50 million. Pennsylvania and Georgia would each receive close to $40 million.MCI already reached a settlement in May with Mississippi, paying the state $100 million and turning over the former physical headquarters of WorldCom, an office tower valued at $7 million.
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