Nortel: We Owe the IRS Nothing

By Mark Evans | Published: September 16, 2009

After being hit with a $3-billion tax bill from the Internal Revenue Service last month, Nortel has fired back in a court filing, claiming there “is no reasonable or realistic basis for the IRS claim”.

“The IRS overstates the amount of income of the NNI Filing Group that could be subject to US federal income tax, and thus erroneously asserts a claim for income tax due,” Nortel said in U.S. Bankruptcy Court for the District of Delaware.

Nortel said it had no cash tax liability for the 1998 to 2007 taxable periods, aside from $6 million cash tax paid for alternative minimum tax liability, adding that the IRS paid Nortel a $717 million refund in 2002 that Nortel had paid in income taxes for 1998, 1999 and 2000

Nortel also said in the filing it had a net taxable loss of more than $3.6 billion from 1998 to 2000, and nearly $5.6 billion in 2001 and 2002.

The IRS claims Nortel owes $1.804-billion in taxes from 1998 to 2009, as well as $1.16-billion in penalties. There is also an addition tax claim of $49.2-million for a grand total of $3.016-billion.

[Slashdot] [Digg] [Reddit] [del.icio.us] [Facebook] [Technorati] [Google] [StumbleUpon]
This entry was posted in Financials, Legal Issues and tagged , , . Bookmark the permalink. Post a comment or leave a trackback: Trackback URL.
  • protosphere
    Tax evasion... heh, like Al Capone
  • protosphere
    Who's accounting are we to believe?
  • RedFlag
    At this point, it doesn;t matter who is right, IRS or NT. It's the judges decision that counts. I think the boys club wins this won over the IRS...... money continues to be siphoned off from Nortel into private sector.

    Otherwise, as another poster says, creditors may settle with IRS to avoid a long legal battle.

    NT can come out of Chap11 because it has the cash to do so because bonds aren't due, only the interest payments are due.
  • GoProto
    "NT can come out of Chap11 because it has the cash to do so because bonds aren't due, only the interest payments are due."
    -----------------
    re
    Huh? You are kidding , right?

    GP
  • RedFlag
    I think 1B bonds are due 2011.

    So why not make the interest payment now. Pay severance to employees. Pay out dividends to shareholders. Pay pensions.

    Then go bankrupt.

    SO.... The only difference is that more money goes to the small guy should NT come out of bankruptcy. Eventually NT dies. It's a matter of who gets to eat the carcass.
  • GoProto
    I do Not Believe they are coming out of BK..
    The carcass has already begun to be ravished. It's now just a matter of time.
  • RedFlag
    I don't believe NT is comming out of BK either.

    Consider that most small businesses that are incorporated will shaft the bond holder in a BK.

    Say a person owns a company and someone loans it money to run the business with no debt covenants attached. If the business goes bad, what usually happens is that the owner takes out the money from the corporation in the form of salary/expenses/dividends. Then BK is declared and money lender is screwed. This happens all the time.

    Is it still possible for NT to do the same? Theoretically speaking...yes, NT can come out of BK and shaft bondholders. (but maybe money from the asset sales are locked up for creditors)
  • less
    We owe the IRS nothing, our employees zip and customers zero.
  • GoProto
    Sounds like Colonel (Wilhelm) Klink on Hogan's Heroes-- " We owe the IRS NOTH-INK, Commandant!!!
  • tryn2makealivin
    "Nortel: We Owe the IRS Nothing" yeah I remember the last 128 million people who said that :)
  • GoProto
    Blow by Blow (so to speak) account of auction on No Jitter:


    http://www.nojitter.com/blog/archives/2009/09/the_auction_blo.html
  • doggy
    anyone have info on layoffs in Raleigh/Durham NC area. people are being let go, this is part of the erickson deal. some are being told they will get letters soon with a yes you can stay or no you can go and some won't have any notification for anything what's going on we have not had any updates
  • tryn2makealivin
    Its not just part of the Ericson deal because I know many in Enterprise, IT/IS and other organizations that got it yesterday in RTP. The sharks are not letting up, its a blood bath everywhere.
  • PM_Guy
    I find the IRS claims as disgusting as the the bonuses of the Nortel Executives. A bunch of accountants sitting around a table with orders to try and figure out how the can take advantage of a bankrupt company and maximize the amount of money they can steal from the legitimate creditors.

    They will then use the muscle of the US gov't lawyers to force out a settlement from the company and creditors who will want to avoid the expensive cost to continue to fight this and lose even more.

    The only winners again are the lawyer who will charge millions to fight this in court.

  • wasthere
    Your exactly right PM Guy. These claims are probably about the transfer prices from goods that multinationals companies are charging themselves when they do make a product in a certain area(country) and sell it in another country. The idea is to charge a maximum price to the subsidiary where the country income tax is the greater. Doing so, you make the larger profit in the lower income tax country and the smaller where the income tax is greater. Every international companies are pulling that trick to a certain extent. IRS knows that but you have to prove it.

    In the case of Nortel, there's no better moment to place that claim. Creditors will probably have to settle an arrangement with the IRS if they want to get their share of $$ before their are buried. The IRS are just going the easy way, unscrupulously like jackals on a dead buddy.
    Disgusting !!
  • zeroman
    i should have been a lawyer. why did i ever believe in engineering. sigh. i could drive a porsche just on one case alone.
  • Nortel_Employee_2009
    I agree.

    Engineering prefession has been bastardized over the years and reduced to level of a peon. I wish I never went into engineering as I have been taken advanatage of all my life. In end I always end up empty handed with empty pockets and no future prospects.

    I wish upon all the Nortel current and Ex Execs that they pay thru their noses for all the pain they have inflicted upon the empoyees and their families. I believe in Karma....I am very hopeful it will manifest itself in some form or other.

  • scalppeeler
    Not In Canada.
    No Harm, Disgrace or financial difficulty will prey upon any of these clowns.
    Just the way it is up in the Great White North.
  • GoProto
    I bet it's pretty difficult to determine what NT may or may not owe to anyone. This will go on for years. That's what happens when you have statements re-stated four times or so, and former employees and execs cooking the books. No one can predict the outcome of this latest addition to the pile of Sh*t. Here. Take a Number. The line is over There. It now stretches across the border, both literally and figuratively.
  • doggy
    How about employees and ex-employees for their options and stock that vanished from the lawsuit or purchase money too any news on that??
  • nortelex
    Good! may be the ex-employees can still get something.
  • bankrupt_bob
    What would happen to the IRS "IF" their claim turned out to be "false?"

    ;>)
  • GoProto
    You know as well as I do - No-Thing
  • horace_grimswold
    Further questions about the tax evasion matter were directed to NNI spokesman Tony Soprano, who further added: "So whatchya gonna do 'bout it, buddy?"
  • GoProto
    Yeah, Meet me in the Meat locker , buddy. ;>)
blog comments powered by Disqus
  • TwitterCounter for @markevans
  • Seeking Alpha Certified
data recovery