8 ms·

The infraction happened in 2004-2013. So that would be over three billion dollars per year. Microsoft’s operating income in fiscal year 2005 was about $15B and

by pavlov 3y ago

The infraction happened in 2004-2013. So that would be over three billion dollars per year. Microsoft’s operating income in fiscal year 2005 was about $15B and in 2013 almost $27B. So you can kind see where the IRS is getting this number: if they believe that Microsoft evaded tax worth about 10-15% of its earnings before taxes, that’s how it would add up to this whopping sum. It seems like Microsoft believes they can settle for something much lower. The stock price doesn’t seem to be hurting pre-market at all.

londons_explore 3y ago
> The stock price doesn’t seem to be hurting pre-market at all. Big investors will have eyes and ears inside the IRS, so will have known for years about this already.
- willcipriano 3y ago
  I think a lot of the market is people pointing at other people as if they had done the due diligence that they couldn't be bothered with, and those people pointing back.
  - brianwawok 3y ago
    That’s why a scam startup is able to rocket as soon as 1 named investor signs on. See the juice squeezing bag company etc.
    - kylebenzle 3y ago
      Hey Juicearoo was a great product! It solved the problem of me having a bag of juice and needing to get the juice out.
      - benreesman 3y ago
        I’m this close to having this printed and framed, but I can’t find framearoo.com.
      - stephencanon 3y ago
        They had outstanding product-market fit. The _only_ problem is that the market of people who have juice bags and do not know how to open them (I.e. two year olds) do not make purchasing decisions.
      - Drakim 3y ago
        They should simply have gone the the industry standard route and lobbied to make it illegal to squeeze the bags by hand.
    - adolph 3y ago
      On paper it makes sense to have a microprocessor guide the pressure used on fruit and vegetable pulp [0]. Between that and the introduction of software to manage the fruit supply chain, the Juicero embodied Marc Andreessen's prophecy [1]. Unfortunately, they got the verb wrong: software is eating _not_ drinking the world. 0. https://en.wikipedia.org/wiki/Juicero https://en.wikipedia.org/wiki/Juicero 1. https://a16z.com/why-software-is-eating-the-world/ https://a16z.com/why-software-is-eating-the-world/
      - jeremyjh 3y ago
        Does it make sense to have an engine squeeze a pre-packaged bag of juice?
        adolph 3y ago
        Of course not. However, it wasn’t prepackaged juice (liquid), it was pulp, the part of plants from which juice is squeezed. Have you ever seen one of those machines in restaurants that from a hopper full of oranges, automatically slices, squeezes the juice into a glass and puts the rind etc into a composting bag? They do that to deliver a fresh glass of juice that people believe has a material difference from a can of frozen concentrate. Juicero was that but simplified and expanded to more than just oranges. Consider the factory process of making different juices. Might use heat, introduce other molecules, etc. By performing part of the task in the factory and the final extraction onprem, there may be some meaningful differences in the consumable. But sure, let’s all poke fun at something without considering the operational context. https://www.ticomachine.com/faq/how-is-orange-juice-made.html https://www.ticomachine.com/faq/how-is-orange-juice-made.htm...
        blitzar 3y ago
        > Have you ever seen one of those machines in restaurants that from a hopper full of oranges automatically slices, squeezes the juice into a glass and puts the rind etc into a composting bag Apparently the founders and investors had not.
  - jefftk 3y ago
    The more you believe that the more you should expect the stock price to move on announcements like this one.
    - duxup 3y ago
      I think the other users point was that in the past the prices didn’t move because people assumed that other people knew what was going on (and they were not selling or driving prices down). Accordingly the price might not move because of similar assumptions. To be clear that’s just how I read that comment. I know nothing about this situation with Microsoft.
- bsenftner 3y ago
  At what point does information such as this become "insider information" and illegal to share? These "eyes and ears" need to have their taxes audited...
  - mensetmanusman 3y ago
    Information always leaks out, especially with the way every government document is immediately analyzed and parsed by the big players. The public record is quite public.
  - gizmo 3y ago
    Never, because "insider information" is a legal concept that doesn't correspond with what people intuit it means. People wrongly think insider trading is when one party unfairly profits from having important information other investors don't have. Also, sharing "insider information" isn't illegal. In some narrow cases profiting off of "insider information" is illegal, but in most cases it's not.
    - seunosewa 3y ago
      In which cases is it legal?
      - gizmo 3y ago
        Pretty much all cases? If you're an institutional investor you can just call the CEO or investor relations and ask them tough questions about their business. Sometimes you can figure out within minutes that the CEO is a bozo. You can visit their offices and talk to the employees. Are they smart and passionate and hard-working, or demoralized and looking to jump ship? You can also derive material information for instance through freedom of information requests. Is a business being investigated by the SEC? If you write the right letter you can find out based on the kind of form letter you get in response. This information is clearly material (would move the stock if made public) and non-public (the SEC hasn't disclosed its investigation yet) and yet you're free to trade on this information because you derived it and because any investor would have gotten the same response if they had known exactly which magic words to use in their letter to the SEC. If the CFO leaks the numbers of the quarter and you trade based on that you risk jail time. If you watch the company parking lot and notice that the finance department and CFO stay at work until 11pm in the week leading up to their earnings report you are free to short the stock based on this info.
- jjallen 3y ago
  It was likely known about and also is a small percent of the market cap. The present value will also be reduced by the time value of money, which is not inconsequential over the quite a few years this will take to settle.
- bannedbybros 3y ago
  [dead]
- WillPostForFood 3y ago
  IRS started a tax investigation in 2007 of Microsoft's 2004-2006 tax returns, which has been somewhat exposed to the public due to the lawsuits along the way. https://www.seattletimes.com/business/microsoft/microsoft-irs-going-to-court-over-longtime-tax-scrutiny/ https://www.seattletimes.com/business/microsoft/microsoft-ir...
- bmitc 3y ago
  That's insider trading.
- malfist 3y ago
  Are you really suggesting that investors run spy networks and that they spy on the IRS?
  - CamperBob2 3y ago
    Why not? At least one church did just that.
- chollida1 3y ago
  > Big investors will have eyes and ears inside the IRS, so will have known for years about this already. Sorry, just so I'm clear, you are claiming that major hedge funds have "moles" in the IRS that illegally funnel them the private tax information of major public companies? What possible source do you have for this?
  - ericmay 3y ago
    At this point people assume everything is a scam, everything is "compromised", and everyone except the "little guy" is in on it. It's really silly. You might as well also claim that the IRS has moles inside of Microsoft and is compromised which is why they're going to get this $27 billion in owed payments and investors had no idea! Better yet, the IRS and Microsoft are working together on a secret AI tax scheme and this is a cover-up for transferring large amounts of funds to the IRS or to Microsoft for the program to work.
    - beagle3 3y ago
      … and yet, when an academic realized that option dating couldn’t happen by chance, it turned out many investors and CFOs were all in on the option backdating scheme, but the IRS wasn’t.
  - IG_Semmelweiss 3y ago
    I don't think it needs to be "moles" There are tons of "Expert networks" companies where they tap key personnel for market info. I have received these sort of inquiries many times in the past. Hedge Funds are major users of these. I can easily see the line of inquiry not breaking the law but getting close enough to extrapolate information on the companies being targeted (IRS personnel, for example), without outright naming them. This is kind of digital fingerprinting, but for companies. You don't may never get the name of the company, but at some point the questions become so specific that shoe will only fit 1-2 companies. How many companies have personnel primarily in the US, HQ in Ireland, have revenues >1B, and sell operating systems as a primary source of revenue ?
    - 3y ago
- JumpCrisscross 3y ago
  > Big investors will have eyes and ears inside the IRS This has been going on since 2007. The IRS sued Microsoft in 2015 [1] and been publicly targeting them since 2020 [2]. [1] https://www.seattletimes.com/business/microsoft/microsoft-irs-going-to-court-over-longtime-tax-scrutiny/ https://www.seattletimes.com/business/microsoft/microsoft-ir... [2] https://www.propublica.org/article/the-irs-decided-to-get-tough-against-microsoft-microsoft-got-tougher https://www.propublica.org/article/the-irs-decided-to-get-to...
blitzar 3y ago
+ 10 years of interest and penalties, compounding.
- littlestymaar 3y ago
  From the article: > Microsoft owes the Internal Revenue Service (IRS) $28.9 billion in back taxes, not including penalties and interest
  - cma 3y ago
    There was close to a zero interest rate during all that time, or does IRS use something way above normal for their rate?
    - nkozyra 3y ago
      Back taxes have a baseline rate that grows at certain increments of lateness but is ultimately capped. I don't think it's in any way tied to the base or prime rate.
      - littlestymaar 3y ago
        Based on what happens in my country, it could be both penalty + some interest rates based on the reference rate (which definitely haven't been zero for the past two years btw) but not equal to it.
    - blitzar 3y ago
      Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. https://www.irs.gov/newsroom/interest-rates-increase-for-the-fourth-quarter-2023 https://www.irs.gov/newsroom/interest-rates-increase-for-the...
  - blitzar 3y ago
    My bad first scan read (probably wrong now I look at it) was; The IRS says Microsoft owes an additional $28.9 billion -- in tax for 2004 to 2013 plus penalties and interest For an SEC filing they really should be declaring the actual value of their liability - the interest on the bill is going to be $10bn+
dragontamer 3y ago
> It seems like Microsoft believes they can settle for something much lower. The stock price doesn’t seem to be hurting pre-market at all Given the Stock Markets inability to predict the Twitter buyout despite public documents stating Elon Musk's contract to buy at $54.20/share throughout 2022, I'm pretty sure that stock market investors are literally illiterate, unable to read public documents. Anyone who bought Twitter at $35/share after the contracts public disclosure knows what I'm talking about. --------- AMC / APE for another example. Anyone who short sold AMC and bought long APE made bank this past year (before the AMC/APE stock ticker merge there were public documents in December 2022 stating AMCs intention to merge the two one-for-one) I believe I saw an opportunity as wide as $8 for AMC and $1.50 for a legally equivalent APE a few months ago. Literally public documents with public court signatures and everything, but so many people remaining ignorant for months, providing anyone 'who can read' an opportunity to make tons of nearly risk free money.
- smcl 3y ago
  I don't think it's quite that simple. After the offer was submitted he famously tried hard to NOT buy Twitter. In the end his attempts to back out of the purchase because of the supposed undisclosed bot problem were thrown out in court, but iirc he could still have pulled out by paying "only" a couple billion dollars in fines or something. I guess it comes down to "do you believe Elon Musk when he says something" and plenty of people understandably didn't. That doesn't make them "literally illiterate" though.
  - dragontamer 3y ago
    > but iirc he could still have pulled out by paying "only" a couple billion dollars in fines or something. That clause was clearly for things outside of Elon (or former Twitter)'s control. Like if a government stepped in to stop the purchase. Elon never had a good counter argument. So it was simply a case of those who were able to read the public court documents vs the ones who believed Elons out-of-court media blitz. Alas, the only arguments that matter in court are the arguments that are filled in court. None of the discussion points you talked about even made it to the case, they were laughed out long before Elon gave up and bought Twitter. ------ Reading. It's a superpower. That's what the past year has taught me. A surpring number of people cannot read and will believe falsehoods even if they contradict written and agreed upon documents.
ubermonkey 3y ago
>It seems like Microsoft believes they can settle for something much lower. This is almost CERTAINLY true. MSFT will be able to tie this up in court, and has tremendous motivation to do so.
goodbyesf 3y ago
> It seems like Microsoft believes they can settle for something much lower. They could hire the best lawyers, accountants, lobbyists, etc in the world. Unless someone at microsoft did something criminal, it's likely they could knock a significant portion off the tax bill. > The stock price doesn’t seem to be hurting pre-market at all. Microsoft's market cap is $2.5 Trillion. The one-time tax bill amounts to about 1% of its 'total value'. It's like a one time $1000 special property tax on your $100K rental property. It sucks but it's not the end of the world. Besides, even if they had to pay $30 billion in back taxes, MSFT's customers are utlimately going to pay for it, not microsoft. It doesn't affect microsoft's market share in OS, Office, Servers, etc.

by pavlov 3y ago

londons_explore 3y ago

> The stock price doesn’t seem to be hurting pre-market at all. Big investors will have eyes and ears inside the IRS, so will have known for years about this already.

willcipriano 3y ago
I think a lot of the market is people pointing at other people as if they had done the due diligence that they couldn't be bothered with, and those people pointing back.
- brianwawok 3y ago
  That’s why a scam startup is able to rocket as soon as 1 named investor signs on. See the juice squeezing bag company etc.
  - kylebenzle 3y ago
    Hey Juicearoo was a great product! It solved the problem of me having a bag of juice and needing to get the juice out.
    - benreesman 3y ago
      I’m this close to having this printed and framed, but I can’t find framearoo.com.
    - stephencanon 3y ago
      They had outstanding product-market fit. The _only_ problem is that the market of people who have juice bags and do not know how to open them (I.e. two year olds) do not make purchasing decisions.
    - Drakim 3y ago
      They should simply have gone the the industry standard route and lobbied to make it illegal to squeeze the bags by hand.
  - adolph 3y ago
    On paper it makes sense to have a microprocessor guide the pressure used on fruit and vegetable pulp [0]. Between that and the introduction of software to manage the fruit supply chain, the Juicero embodied Marc Andreessen's prophecy [1]. Unfortunately, they got the verb wrong: software is eating _not_ drinking the world. 0. https://en.wikipedia.org/wiki/Juicero https://en.wikipedia.org/wiki/Juicero 1. https://a16z.com/why-software-is-eating-the-world/ https://a16z.com/why-software-is-eating-the-world/
    - jeremyjh 3y ago
      Does it make sense to have an engine squeeze a pre-packaged bag of juice?
      - adolph 3y ago
        Of course not. However, it wasn’t prepackaged juice (liquid), it was pulp, the part of plants from which juice is squeezed. Have you ever seen one of those machines in restaurants that from a hopper full of oranges, automatically slices, squeezes the juice into a glass and puts the rind etc into a composting bag? They do that to deliver a fresh glass of juice that people believe has a material difference from a can of frozen concentrate. Juicero was that but simplified and expanded to more than just oranges. Consider the factory process of making different juices. Might use heat, introduce other molecules, etc. By performing part of the task in the factory and the final extraction onprem, there may be some meaningful differences in the consumable. But sure, let’s all poke fun at something without considering the operational context. https://www.ticomachine.com/faq/how-is-orange-juice-made.html https://www.ticomachine.com/faq/how-is-orange-juice-made.htm...
        blitzar 3y ago
        > Have you ever seen one of those machines in restaurants that from a hopper full of oranges automatically slices, squeezes the juice into a glass and puts the rind etc into a composting bag Apparently the founders and investors had not.
- jefftk 3y ago
  The more you believe that the more you should expect the stock price to move on announcements like this one.
  - duxup 3y ago
    I think the other users point was that in the past the prices didn’t move because people assumed that other people knew what was going on (and they were not selling or driving prices down). Accordingly the price might not move because of similar assumptions. To be clear that’s just how I read that comment. I know nothing about this situation with Microsoft.
bsenftner 3y ago
At what point does information such as this become "insider information" and illegal to share? These "eyes and ears" need to have their taxes audited...
- mensetmanusman 3y ago
  Information always leaks out, especially with the way every government document is immediately analyzed and parsed by the big players. The public record is quite public.
- gizmo 3y ago
  Never, because "insider information" is a legal concept that doesn't correspond with what people intuit it means. People wrongly think insider trading is when one party unfairly profits from having important information other investors don't have. Also, sharing "insider information" isn't illegal. In some narrow cases profiting off of "insider information" is illegal, but in most cases it's not.
  - seunosewa 3y ago
    In which cases is it legal?
    - gizmo 3y ago
      Pretty much all cases? If you're an institutional investor you can just call the CEO or investor relations and ask them tough questions about their business. Sometimes you can figure out within minutes that the CEO is a bozo. You can visit their offices and talk to the employees. Are they smart and passionate and hard-working, or demoralized and looking to jump ship? You can also derive material information for instance through freedom of information requests. Is a business being investigated by the SEC? If you write the right letter you can find out based on the kind of form letter you get in response. This information is clearly material (would move the stock if made public) and non-public (the SEC hasn't disclosed its investigation yet) and yet you're free to trade on this information because you derived it and because any investor would have gotten the same response if they had known exactly which magic words to use in their letter to the SEC. If the CFO leaks the numbers of the quarter and you trade based on that you risk jail time. If you watch the company parking lot and notice that the finance department and CFO stay at work until 11pm in the week leading up to their earnings report you are free to short the stock based on this info.
jjallen 3y ago
It was likely known about and also is a small percent of the market cap. The present value will also be reduced by the time value of money, which is not inconsequential over the quite a few years this will take to settle.
bannedbybros 3y ago
[dead]
WillPostForFood 3y ago
IRS started a tax investigation in 2007 of Microsoft's 2004-2006 tax returns, which has been somewhat exposed to the public due to the lawsuits along the way. https://www.seattletimes.com/business/microsoft/microsoft-irs-going-to-court-over-longtime-tax-scrutiny/ https://www.seattletimes.com/business/microsoft/microsoft-ir...
bmitc 3y ago
That's insider trading.
malfist 3y ago
Are you really suggesting that investors run spy networks and that they spy on the IRS?
- CamperBob2 3y ago
  Why not? At least one church did just that.
chollida1 3y ago
> Big investors will have eyes and ears inside the IRS, so will have known for years about this already. Sorry, just so I'm clear, you are claiming that major hedge funds have "moles" in the IRS that illegally funnel them the private tax information of major public companies? What possible source do you have for this?
- ericmay 3y ago
  At this point people assume everything is a scam, everything is "compromised", and everyone except the "little guy" is in on it. It's really silly. You might as well also claim that the IRS has moles inside of Microsoft and is compromised which is why they're going to get this $27 billion in owed payments and investors had no idea! Better yet, the IRS and Microsoft are working together on a secret AI tax scheme and this is a cover-up for transferring large amounts of funds to the IRS or to Microsoft for the program to work.
  - beagle3 3y ago
    … and yet, when an academic realized that option dating couldn’t happen by chance, it turned out many investors and CFOs were all in on the option backdating scheme, but the IRS wasn’t.
- IG_Semmelweiss 3y ago
  I don't think it needs to be "moles" There are tons of "Expert networks" companies where they tap key personnel for market info. I have received these sort of inquiries many times in the past. Hedge Funds are major users of these. I can easily see the line of inquiry not breaking the law but getting close enough to extrapolate information on the companies being targeted (IRS personnel, for example), without outright naming them. This is kind of digital fingerprinting, but for companies. You don't may never get the name of the company, but at some point the questions become so specific that shoe will only fit 1-2 companies. How many companies have personnel primarily in the US, HQ in Ireland, have revenues >1B, and sell operating systems as a primary source of revenue ?
  - 3y ago
JumpCrisscross 3y ago
> Big investors will have eyes and ears inside the IRS This has been going on since 2007. The IRS sued Microsoft in 2015 [1] and been publicly targeting them since 2020 [2]. [1] https://www.seattletimes.com/business/microsoft/microsoft-irs-going-to-court-over-longtime-tax-scrutiny/ https://www.seattletimes.com/business/microsoft/microsoft-ir... [2] https://www.propublica.org/article/the-irs-decided-to-get-tough-against-microsoft-microsoft-got-tougher https://www.propublica.org/article/the-irs-decided-to-get-to...

blitzar 3y ago

+ 10 years of interest and penalties, compounding.

littlestymaar 3y ago
From the article: > Microsoft owes the Internal Revenue Service (IRS) $28.9 billion in back taxes, not including penalties and interest
- cma 3y ago
  There was close to a zero interest rate during all that time, or does IRS use something way above normal for their rate?
  - nkozyra 3y ago
    Back taxes have a baseline rate that grows at certain increments of lateness but is ultimately capped. I don't think it's in any way tied to the base or prime rate.
    - littlestymaar 3y ago
      Based on what happens in my country, it could be both penalty + some interest rates based on the reference rate (which definitely haven't been zero for the past two years btw) but not equal to it.
  - blitzar 3y ago
    Generally, in the case of a corporation, the underpayment rate is the federal short-term rate plus 3 percentage points and the overpayment rate is the federal short-term rate plus 2 percentage points. The rate for large corporate underpayments is the federal short-term rate plus 5 percentage points. https://www.irs.gov/newsroom/interest-rates-increase-for-the-fourth-quarter-2023 https://www.irs.gov/newsroom/interest-rates-increase-for-the...
- blitzar 3y ago
  My bad first scan read (probably wrong now I look at it) was; The IRS says Microsoft owes an additional $28.9 billion -- in tax for 2004 to 2013 plus penalties and interest For an SEC filing they really should be declaring the actual value of their liability - the interest on the bill is going to be $10bn+

dragontamer 3y ago

> It seems like Microsoft believes they can settle for something much lower. The stock price doesn’t seem to be hurting pre-market at all Given the Stock Markets inability to predict the Twitter buyout despite public documents stating Elon Musk's contract to buy at $54.20/share throughout 2022, I'm pretty sure that stock market investors are literally illiterate, unable to read public documents. Anyone who bought Twitter at $35/share after the contracts public disclosure knows what I'm talking about. --------- AMC / APE for another example. Anyone who short sold AMC and bought long APE made bank this past year (before the AMC/APE stock ticker merge there were public documents in December 2022 stating AMCs intention to merge the two one-for-one) I believe I saw an opportunity as wide as $8 for AMC and $1.50 for a legally equivalent APE a few months ago. Literally public documents with public court signatures and everything, but so many people remaining ignorant for months, providing anyone 'who can read' an opportunity to make tons of nearly risk free money.

smcl 3y ago
I don't think it's quite that simple. After the offer was submitted he famously tried hard to NOT buy Twitter. In the end his attempts to back out of the purchase because of the supposed undisclosed bot problem were thrown out in court, but iirc he could still have pulled out by paying "only" a couple billion dollars in fines or something. I guess it comes down to "do you believe Elon Musk when he says something" and plenty of people understandably didn't. That doesn't make them "literally illiterate" though.
- dragontamer 3y ago
  > but iirc he could still have pulled out by paying "only" a couple billion dollars in fines or something. That clause was clearly for things outside of Elon (or former Twitter)'s control. Like if a government stepped in to stop the purchase. Elon never had a good counter argument. So it was simply a case of those who were able to read the public court documents vs the ones who believed Elons out-of-court media blitz. Alas, the only arguments that matter in court are the arguments that are filled in court. None of the discussion points you talked about even made it to the case, they were laughed out long before Elon gave up and bought Twitter. ------ Reading. It's a superpower. That's what the past year has taught me. A surpring number of people cannot read and will believe falsehoods even if they contradict written and agreed upon documents.

ubermonkey 3y ago

>It seems like Microsoft believes they can settle for something much lower. This is almost CERTAINLY true. MSFT will be able to tie this up in court, and has tremendous motivation to do so.

goodbyesf 3y ago

> It seems like Microsoft believes they can settle for something much lower. They could hire the best lawyers, accountants, lobbyists, etc in the world. Unless someone at microsoft did something criminal, it's likely they could knock a significant portion off the tax bill. > The stock price doesn’t seem to be hurting pre-market at all. Microsoft's market cap is $2.5 Trillion. The one-time tax bill amounts to about 1% of its 'total value'. It's like a one time $1000 special property tax on your $100K rental property. It sucks but it's not the end of the world. Besides, even if they had to pay $30 billion in back taxes, MSFT's customers are utlimately going to pay for it, not microsoft. It doesn't affect microsoft's market share in OS, Office, Servers, etc.