November 24, 2014 / 6:18 PM / in 3 years

Microsoft sues IRS for details of probe on internal transactions

(Reuters) - Microsoft sued the Internal Revenue Service on Monday, seeking information about a law firm hired by U.S. tax authorities in a review of how the software company books sales between subsidiaries.

A shadow of a man using his mobile phone is cast near Microsoft logo at the 2014 Computex exhibition in Taipei June 4, 2014. REUTERS/Pichi Chuang

The lawsuit, filed in a District of Columbia federal court, says the IRS entered into a contract this year with Quinn Emanuel Urquhart & Sullivan, which specializes in litigation. The agency is paying Quinn Emanuel more than $2 million in connection with its examination of Microsoft Corp’s tax returns between 2004 and 2009, the court filing said.

Microsoft’s lawsuit said the IRS had not fulfilled a Freedom of Information request seeking the complete Quinn Emanuel contract and other documents.

“Government agencies, funded by citizens, have an obligation of transparency under the Freedom of Information Act,” Microsoft said in a statement.

An IRS spokesman declined to comment on pending litigation. A Quinn Emanuel representative was not immediately available.

Multinational corporations value goods and services moving across international borders from one of their units to another. These cash transfers frequently reduce a corporation’s global tax costs.

The IRS has scrutinized technology companies, including Microsoft and Amazon.com Inc, over how they account for such transfer pricing.

Los Angeles-based Quinn Emanuel has gotten other U.S. government clients in recent years. It represented the Federal Housing Finance Agency in high-profile lawsuits against financial institutions, including Goldman Sachs Group Inc, over the quality of mortgage-backed securities they sold before the financial crash.

The Microsoft lawsuit in U.S. District Court, District of Columbia, is Microsoft Corp vs. Internal Revenue Service, 14-1982.

Reporting by Dan Levine; Editing by Lisa Von Ahn

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