Altria to Pay $971 Million to Resolve a Tax Dispute

The Altria Group, the nation’s largest tobacco company, announced on Tuesday that it would pay $971 million to resolve a tax dispute concerning leasing transactions in the years 2000 through 2003.

Analysts said the decision was not surprising.

“A big number, but expected,” David J. Adelman, tobacco industry analyst for Morgan Stanley, wrote in a note to investors. The company made the announcement in a filing with the Securities and Exchange Commission.

Mr. Adelman said Altria previously paid about $150 million to conclude an Internal Revenue Service examination of its 1996-99 tax returns on a similar tax issue. He said it had also previously disclosed that it expected to face another tax liability of about $900 million for 2004 to 2009.

“This cash tax payment, just like the 2006 payment, is part of the ‘normal’ cadence of a federal income tax related challenge,” Mr. Adelman wrote after the announcement.

Altria, makers of the dominant Marlboro cigarette brand, said in its filing that it still reserved the right and intended to seek a refund from the I.R.S. or to bring a legal action over the tax depreciation issue. The I.R.S. declined to comment.

Altria said the payment, to be made in the third quarter, would not affect its 2010 earnings guidance.

The company’s stock dipped in the last 15 minutes of trading on the New York Stock Exchange to close down 0.84 percent at $20.12 a share.

The tax issue, not unique to Altria, concerns depreciation of some leveraged leases at the Philip Morris Capital Corporation. In recent years, the I.R.S. has challenged the decisions of some companies to accelerate tax deductions on certain leasing transactions between nonprofit and profit-making entities.

Altria recently lost a federal jury decision on the issue over its acquisition of interests in a Long Island Rail Road maintenance facility, a Dutch wastewater treatment plant and two power plants.

Altria, based in Richmond, Va., made a $3.2 billion profit on sales of $23.6 billion last year. It is the parent company of Philip Morris USA; U.S. Smokeless Tobacco, makers of Copenhagen and Skoal; John Middleton, makers of cigar and pipe tobacco; and Ste. Michelle Wine Estates.

Altria has been the only major tobacco company to support Food and Drug Administration regulation of tobacco products. The industry has faced declining volumes and higher taxes in the United States, yet higher profits with higher prices.

source: nytimes.com

Similar Posts:

If you enjoyed this post, make sure you subscribe to my RSS feed!