Boston Scientific could owe $525m in back taxes
NATICK -- Medical device maker Boston Scientific Corp. said today that the Internal Revenue Service believes it owes more than half a billion dollars in taxes and interest.
The IRS concluded that the company's Guidant Corp. division owes $525.1 million in taxes, Boston Scientific said. The company would also owe interest on those taxes. The estimate is the result of an audit of Guidant's finances between 2001 and 2003, before it was acquired by Boston Scientific.
Boston Scientific said it disagrees with the IRS' assessment and will contest its decision in court. The company will not have to pay the taxes until the dispute is resolved, which could take years.
Boston Scientific said it believes it has adequate tax reserves to pay the additional assessment if necessary, and that a full payment would not have a significant effect on its business or its financial condition.
The company said the IRS is assessing additional taxes related to transfer prices on technology license agreements between some of Guidant's U.S. and foreign businesses. Boston Scientific said it disagrees with the methodology the IRS used in determining the additional taxes.
The company said it was first notified in 2008 that the IRS believed Guidant owed a substantial amount in additional taxes. Boston Scientific said it received an IRS notice of deficiency on Friday. It disclosed the results of the audit in a filing with the Securities and Exchange Commission.
Boston Scientific acquired Guidant for $27 billion in 2006. Since then, Guidant's implantable heart defibrillators have been the subject of multiple product recalls and safety warnings.
This spring, Guidant agreed to plead guilty to two misdemeanor charges that it failed to inform regulators about changes to heart devices that were prone to short circuiting. Those issues also took place before Guidant was bought by Boston Scientific.
Guidant said it would pay a $296 million penalty, but a judge rejected the plea deal in April. The company, which declined to comment on the matter when contacted Tuesday, was advised to consider a modified agreement.
Boston Scientific shares fell 17 cents, or 2.2 percent, to $7.65 in morning trading.