SEATTLE (AP) — A federal judge says it’s likely that Microsoft was trying to avoid or evade paying U.S. taxes and is ordering the company to hand over financial documents from more than a decade ago.
The Internal Revenue Service has been seeking the documents as part of a long-running investigation into how Microsoft structured a Puerto Rico manufacturing facility starting in 2005. The IRS has said Microsoft hired accounting firm KPMG to set up a cost-sharing arrangement with the Puerto Rican affiliate that shifted taxable revenue out of the U.S.
A ruling Friday by U.S. District Judge Ricardo Martinez says the court “finds itself unable to escape the conclusion that a significant purpose, if not the sole purpose, of Microsoft’s transactions was to avoid or evade federal income tax.”
The Seattle judge gave Microsoft about a week to hand over documents that the IRS has been seeking for several years. The Redmond-based tech company has objected to disclosing the 174 documents, saying U.S. law protects confidential communications with tax professionals.
In a statement, Microsoft said the judge’s ruling was based on “limited information” and that it had “no bearing on the validity of Microsoft’s historical tax arrangements.”