Boston Scientific agrees to pay $275M to settle tax dispute

Just days before trial, medical device maker Boston Scientific Corp. has agreed to pay the Internal Revenue Service $275 million plus interest to settle more than $1 billion in disputed taxes dating back more than a decade.

Boston Scientific, which employs 7,200 people in the Twin Cities, has long disputed the IRS' assertions that the company and its Guidant subsidiary have underpaid corporate taxes by as much as $1.16 billion. The dispute centers on "transfer pricing" and the amount of taxes owed to the United States for intellectual property transferred among its domestic and foreign subsidiaries.

"The primary issue in dispute for all years is related to transfer pricing established under technology license agreements between domestic and foreign subsidiaries of Guidant — in essence, how much one subsidiary of the company paid another for the intellectual property necessary to manufacture, sell or market medical devices," a Boston Scientific spokesman said via e-mail.

The dispute with the IRS was headed for trial Monday.

The settlement Wednesday would resolve notices of tax deficiency to Guidant from 2001 to 2006 and similar notices to Boston Scientific for 2006 and 2007. The deal is contingent on the same settlement methodology being applied to Boston Scientific's disputed taxes for 2008-2010.

The deal may require a review by the congressional Joint Committee on Taxation before it's finalized, according to a securities filing. The company said it expects to cover the costs with money already reserved for the purpose in its financial statements, and it doesn't expect to change its 2016 estimated annual effective tax rate as a result of the settlement.

Joe Carlson • 612-673-4779