Medtronic Settles With IRS Over Overseas Cash in Kyphon Acquisition for $330 Million


Medtronic, a medical device company, has just settled a tax dispute with the Internal Revenue Service over the repatriation of overseas cash for its 2007 acquisition of Kyphon for $330 million. Medtronic used a mix of U.S. and overseas cash in order to pay for the $4.2 billion acquisition.

The dispute arose over the amount of the repatriated $3.3 billion in overseas cash that would be taxable. Taxation of cash generated outside the United States has become an issue because of the large amount of cash that some corporations have acquired through overseas operations. If they bring that cash back into the US, they will have to pay tax on it here, minus the amount that they paid overseas. Lawmakers have discussed a variety of measures to encourage corporations to repatriate their cash located outside the United States and bring it into the country.

Medtronic agreed to pay $275 million to settle the allegations and another $54 million in interest. The company’s settlement does not resolve its dispute with the IRS over transfer pricing that arose from transactions in 2005 and 2006.

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