Microsoft back in court with the IRS this week

Microsoft and the IRS have been battling since 2007, all stemming from Microsoft’s (and other company’s) use of moving software code to overseas subisidiaries, a move that the IRS contends costs the US billions in lost taxes. The IRS has been looking at Microsoft’s books from 2004-2006 since 2007, and recently brought in an outside law firm, Quinn Emanuel Urquhart & Sullivan, to assist in the case. Microsoft is contesting the use of an outside law firm being involved in the case. The IRS sued Microsoft and a number of former executives last year to gain more information for their investigation.

Microsoft is arguing that the IRS is improperly using the outside law firm by delegating government functions to outside lawyers, and is portraying the audit itself as “an example of government overreach and abuse of power”, according to a post in today’s Seattle Times.

The IRS contends that Microsoft illegally used subsidiaries based in Ireland and Bermuda to transfer software sales to those countries, thereby saving some 30 Billion dollars in taxes, according to a report last November by Bloomberg.

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What do you think about overseas subsidiaries?