Google Sues IRS for $83.5 Million

Google has recently come under scrutiny for not paying enough taxes, but now the company says it has paid too much. It is suing the U.S. Internal Revenue Service (IRS) for $83.5 million that the company says should be refunded.

Bloomberg’s Andrew Zajac first reported the news, writing, “Google Inc. (GOOG), owner of the most popular Internet search engine, sued the U.S. Internal Revenue Service for an $83.5 million refund, claiming it was improperly denied a deduction for a 2004 stock transaction with America Online Inc. The IRS erred in disallowing a $238.6 million deduction claimed for the difference between the price AOL paid to exercise a warrant for Google stock and the value of the shares, according to the complaint in U.S. Tax Court.”

CNET’s Don Reisinger explained, “A stock warrant gives the holder — in this case, AOL — the right to purchase shares at a previously set price within a certain time frame. According to the suit, AOL acquired the $238.6 million in shares about three months before Google priced its IPO and went public. That effectively left Google without those shares to sell in its IPO, and since the warrants were used as remuneration for services AOL was providing to Google at the time, the company wanted to expense the total share outlay.”

All Things D ran a statement from Google, which said, “We filed a petition challenging an outstanding issue from our 2003/2004 tax assessment. This is a domestic issue related to stock warrants and we hope to have it resolved soon.”

Chris Crum with WebProNews noted, “The company evidently made note of its intent to file a complaint against the IRS in an SEC filing back in January, without getting into specifics.”