July 2 Security services provider ADT Corp
said it may have to contribute to a tax bill faced by
former parent Tyco International Ltd if the total amount
assessed by the IRS exceeded $1.85 billion.
Tyco said on Monday it had received a notice from the U.S.
Internal Revenue Service stating that several of the company's
former units, including ADT, owed taxes of $883.3 million and
penalties of $154.0 million for tax years from 1997 to 2000. ()
Tyco said four former subsidiaries would contribute to
paying the liabilities under tax-sharing agreements. The
companies are Covidien Plc, TE Connectivity Ltd,
ADT and Pentair Ltd. ()
Tyco also said the IRS had disallowed interest and related
deductions returns totaling about $2.86 billion related to
intercompany debt transactions.
J.P.Morgan analyst Stephen Tusa said he did not expect Tyco
to have created incremental reserves on account of the IRS
Tusa noted that Tyco had already settled similar cases
regarding pre-1997 and 2001-2004 intercompany debt for about 20
percent of the IRS claims.
"There does not appear to be anything substantially
different about these cases," the analyst said.
Tyco said on Monday it disagreed with the IRS position and
intended to file petitions to the U.S. Tax Court contesting the
No payments with respect to these matters would be required
until the dispute is definitively resolved, which, based on the
experience of other companies, could take several years, Tyco
said in the filing.
Covidien said it "strongly" disagrees with the IRS' proposed
adjustments. Pentair was not immediately available for comment.
Shares of ADT, which was spun off from Tyco in September,
were down 2 percent at $39.62 in afternoon trading on the New
York Stock Exchange.