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MCI Agrees to Pay Georgia $39.7 Million in Taxes

Posted on: Thursday, 6 October 2005, 18:00 CDT

By Nancy Badertscher, The Atlanta Journal-Constitution

Oct. 5--Georgia will receive a nearly $40 million windfall from MCI Inc. under a settlement the nation's No. 2 long-distance telephone company is proposing with 15 states for underpaid taxes.

The lump-sum payment could be delivered to the state within 30 days. The money will be used to supplement state spending on education and economic development, and to replenish the state's reserve fund, said Heather Hedrick, spokeswoman for Gov. Sonny Perdue.

"We're enforcing our tax laws and standing firm for the money owed the people of Georgia," she said.

MCI, the successor to scandal-ridden WorldCom Inc., is agreeing to pay $315 million to Georgia, 14 other states and the District of Columbia as part of WorldCom's bankruptcy proceedings.

The settlement agreement, which must be approved by the bankruptcy court, gives Georgia $39.7 million based on the state's claim of $43 million in taxes, not including interest and penalties. A hearing on the settlement agreement is set for next week in New York, state officials said.

Only two states are getting more money in the settlement: New Jersey, $53.3 million; and Pennsylvania, $46.6 million.

State Revenue Commissioner Bart Graham and Attorney General Thurbert Baker, whose offices helped negotiate the settlement, said they were pleased with the outcome. Georgia was one of four states serving as lead negotiators on the settlement.

"Early on the company only offered us $1.5 million," Graham said.

"Others suggested that we not litigate it since we didn't have the budget set aside to litigate it."

Graham said the states decided to go after MCI for what he said was a "laughable" accounting practice, in which it claimed tax exemptions for what it called "management forecasting."

"It's the equivalent of deducting business expenses for management getting up and coming to work in the morning," he said. "All of the sudden your personnel's brain power is an intangible, deductible expense beyond their salary. And they did this to the tune of $20 billion over the years to avoid state income tax in all states that they operated in."

Under the settlement, Virginia-based MCI is not admitting liability or wrongdoing.

"These agreements benefit MCI and the states alike by enabling us to put this issue behind us in a fair and equitable manner," MCI's deputy general counsel, Carol Ann Petren, said in a statement.

States participating in the settlement, besides Georgia, are Alabama, Arkansas, Connecticut, Florida, Iowa, Kentucky, Maryland, Massachusetts, Michigan, Missouri, New Jersey, Ohio, Pennsylvania, Wisconsin, and the District of Columbia.

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Copyright (c) 2005, The Atlanta Journal-Constitution

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MCIP,

Source: The Atlanta Journal and Constitution

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