The settlement is meant to end an IRS dispute that goes back to Guidant, which Boston Sci acquired for $27 billion in 2006.
Boston Scientific has reached a settlement agreement with the IRS to pay $275 million to resolve a tax dispute that goes back to Guidant.
It is but the latest huge payout that Boston Sci has had to make since its $27 billion acquisition of Guidant, a maker of cardiovascular devices including pacemakers, implantable cardioverter-defibrillators, and stents.
By 2010, the IRS was telling Boston Sci that its audit of Guidant finances found more than $500 million in back taxes owed. A year later, the amount had doubled to well over $1 billion owed for the 2001 through 2007 tax years.
Tax issues involved Guidant's intercompany transfer pricing related to technology license agreements between domestic and foreign subsidiaries. There were also problems raised with the financial terms of the sale of Guidant's vascular intervention business to Abbott, which had helped Boston Sci beat Johnson & Johnson in a bidding war for Guidant. (J&J ended up suing Boston Sci, which in a bitter irony wound up settling for $600 million in 2015.)
The $275 million "Stipulation of Settled Issues" with the IRS is still contingent upon the IRS Office of Appeals applying the same basis of settlement to all transfer pricing issues for Boston Scientific's 2008 through 2010 tax years. There also may be a review by the U.S. Congress Joint Committee on Taxation.
Boston Sci acquired Guidant in 2006 in what Fortune magazine has described as the "(second) worst deal ever"--only eclipsed by AOL's notorious purchase of Time Warner in 2000. Since the the Guidant acquisition, Boston Sci has paid billions of dollars in goodwill impairments, and has had to deal with a host of defibrillator-related legal troubles it inherited from Guidant.
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[Money image from Flickr.]