Microsoft is planning to appeal a claim of $28.9 billion in back taxes that it has received from the US Internal Revenue Service (IRS), the company said on Wednesday.\n\nThe Notices of Proposed Adjustment were received on September 26, related to intercompany pricing or transfer pricing, Microsoft said in a regulatory filing. The IRS is seeking an additional tax payment of $28.9 billion, plus penalties and interest for the period between 2004 and 2013.\n\n\u201cAs of September 30, 2023, we believe our allowances for income tax contingencies are adequate,\u201d the company said. \u201cWe disagree with the proposed adjustments and will vigorously contest the Notices of Proposed Adjustment (NOPAs) through the IRS\u2019s administrative appeals office and, if necessary, judicial proceedings.\u201d\n\nIntercompany pricing or transfer pricing is a way for companies to allocate their profits between their operations in different countries and jurisdictions.\n\nThe IRS claims that Microsoft may have breached its prescribed regulations for transfer pricing.\n\n\u201cMany large multinationals use cost-sharing because it reflects the global nature of their business. Because our subsidiaries shared in the costs of developing certain intellectual property, under those IRS cost-sharing regulations, the subsidiaries were also entitled to the related profits,\u201d Daniel Goff, Microsoft\u2019s corporate vice president of worldwide tax and customs, wrote in a blog post that was attached to the SEC filing.\n\nThe notices are the first detailed information that Microsoft has received from the IRS about the agency\u2019s explanations of their views about the issues in question, Goff said.\n\n\u201cThe IRS\u2019s proposed adjustments do not represent a final determination. Not reflected in the proposed adjustments are taxes paid by Microsoft under the Tax Cuts and Jobs Act (TCJA), which could decrease the final tax owed under the audit by up to $10 billion,\u201d Goff wrote.\n\nMicrosoft, which claims to have followed all the IRS\u2019 rules and paid the taxes it owed in the US and around the world, is planning to appeal to the IRS\u2019 Appeals division.\n\nThe company claims to have paid over $67 billion in taxes in the US since 2024.\n\nThe IRS Appeals process is expected to take several years to complete, Goff wrote, adding that if the parties are unable to come to an agreement, Microsoft would be looking to move courts over the issue.\n\nIn the regulatory filing, Microsoft said that presently it doesn\u2019t see any impact on its tax contingencies arising from these issues within the next 12 months.