Tyco Reaches Resolution with IRS Over Tax Dispute -- Update
January 19 2016 - 2:17PM
Dow Jones News
By Bob Tita
Tyco International PLC said it has reached a tentative
settlement to a dispute with the U.S. Internal Revenue Service that
would require Tyco and two businesses it spun off in 2007 to pay up
to $525 million for claims of back taxes.
The settlement, disclosed Tuesday in a regulatory filing, is far
less than the $1 billion to $1.3 billion in taxes and penalties
projected by some analysts. Tyco, TE Connectivity Ltd. and Covidien
PLC, which was acquired last year by Medtronic PLC, would pay the
IRS between $475 million and $525 million.
Tyco, which is based in Ireland and makes fire suppression and
security equipment for commercial buildings, would pay 27% of the
settlement amount, or roughly $128 million to $142 million. TE
Connectivity, which manufacturers electronic components, and
Medtronic PLC, a supplier of medical devices, would be responsible
for 31% and 42% of the settlement respectively.
Tyco spun off TE Connectivity and Covidien as stand-alone public
companies as part of decadelong dismantling of Tyco's business
portfolio. The industrial conglomerate also spun off home security
service ADT Corp. and sold its industrial pipes and valves business
in 2012 to Pentair PLC. Tyco said neither ADT nor Pentair would be
liable for a share of the settlement under an earlier agreement
between Tyco and the IRS.
The settlement is subject to the approval of the IRS Appeals
Division and the U.S. Tax Court. Tyco's portion of the settlement
would be covered by the $215 million that the company has already
set aside for the case. Tyco said it expects to pay its share of
the settlement in the next six months.
The IRS accused Tyco in 2013 of owing as much as $2.8 billion
stemming from deductions of interest payments from Tyco's U.S.
income taxes for loans between its foreign-based businesses from
1997 to 2000. The settlement also would apply to similar pending
IRS claims for 2001 through 2007, Tyco said.
"This is a favorable deal," said Nicholas Heymann, an analyst
for William Blair & Co. "It reduces the uncertainty of getting
this done."
Write to Bob Tita at robert.tita@wsj.com
(END) Dow Jones Newswires
January 19, 2016 14:02 ET (19:02 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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