MCI Inc., formerly WorldCom Inc., will pay $331 million to 15 states and the District of Columbia to settle back tax claims and charges that it engaged in accounting fraud.
The states accused MCI of illegally shielding billions of dollars from state taxes between 1999 and 2002 using a royalty tax plan created by KPMG. The states alleged that the tax plan allowed MCI to charge subsidiaries $24 billion for management expertise -- defining the transfers as royalties and shielding the income from state taxes.
One agreement will give $315 million to 15 states, while North Carolina negotiated a separate agreement for $16 million. MCI is continuing to negotiate with South Carolina. 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 continued as MCI haggled over an agreement barring the states from pursuing criminal charges against individuals.
New Jersey will receive the largest payout, $53 million, and Pennsylvania will receive $46.5 million. Other states receiving settlements are Alabama, Arkansas, Connecticut, Florida, Georgia, Iowa, Kentucky, Maryland, Massachusetts, Michigan, Missouri, Ohio and Wisconsin.
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.
