Procter and Gamble seeks tax refund from IRS

By Katie Bird

- Last updated on GMT

Related tags Internal revenue service Taxation in the united states

Procter and Gamble (P&G) is suing the US Internal Revenue Service, claiming it has been overcharged in taxes.

The personal care products company is asking for the return of $435m in taxes that it paid in response to an IRS audit it disagrees with, according to press reports.

P&G claims it was overcharged

It filed a suit on September 10 in the US District Court for the Southern District of Ohio claiming it was overcharged by the IRS.

Between 2000 and 2005, P&G claims it paid over $6 billion in taxes.

In 2005 the IRS began auditing the company’s tax returns for the years between 2001 and 2005. Earlier this summer the IRS reported a deficiency and asked the Cincinnati-based company to make additional tax payments.

According to details of the lawsuit published in the Cincinnati Enquirer, P&G claimed the IRS’ modifications to the bill were incorrect but the company nonetheless made the payments as it was required.

However, it is now asking that the IRS repay the $435m that it claims it is owed.

Many of the modifications that P&G take issue with centre around the company’s charitable affairs.

It claims that it donated various technologies as well as art work in the knowledge that such contributions would incur tax credits – credits that P&G said are being illegally denied by the IRS.

In the lawsuit P&G references various examples including the ‘fiber fractionation’ technology that it gave to the North Carolina State University. The company estimated the value of this technology, which concerns the manufacture of paper products, at $132.2m. The IRS allowed a $4.5m deduction.

In addition, P&G cited the donation of art work valued at $8.5m to the Cincinnati Art Museum, for which the IRS gave a $6.4m deduction.

Furthermore, the company argues that it should have been allowed $3.6bn in tax credits for costs related to obtaining patents between 2001 and 2005.

Annual sales for the company came in at over $83bn for the fiscal year ending June 30 2008, of which approximately a fifth come from the beauty sector.

Net earnings for 2008 increased by 17 per cent to reach 12.1bn, 2.7bn of which can be attributed to the company’s beauty portfolio.

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