Medtronic inks $221m IRS settlement

Medtronic (NYSE:MDT) agreed to pay out up to nearly $221 million to settle a tax dispute with the U.S. Internal Revenue Service that it inherited when it bought Covidien last year.

The IRS dunned Covidien’s corporate predecessor, Tyco International, in June 2013, disallowing deductions it took from 1997 to 2000 for some $2.8 billion in loans made between 3 former Tyco divisions.

The tax bureau said back then that the companies owed $914 million to the U.S. Treasury – plus another $154 million in penalties.

In a Jan. 19 regulatory filing, Medtronic said that amount was negotiated down to between $475 million and $525 million, of which its share would be 42%, or $199.5 million to $220.5 million.

Tyco would pay 27%, or $128.3 million to $141.8 million, and another former subsidiary, TE Connectivity, would shell out 31%, or $147.3 million to $162.8 million, according to the filing.

Fridley, Minn.-based Medtronic said it’s already set aside enough cash to cover the settlement and doesn’t expect to log any further charges related to the settlement, which must still be finalized with the IRS. That’s expected to go down within the next 6 months, the company said.

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