Yes, a billion dollars. That’s how much the Tribune Co. owes in back taxes from its acquisition of Times Mirror, according to a Tax Court decision yesterday. Editor & Publisher has a thumbnail backstory sketch:
The closely watched tax case revolved around a 1998 transaction between the old Times Mirror Co., which Tribune acquired in 2000, and the Dutch publisher Reed-Elsevier. The deal, in which the Matthew Bender legal textbook publishing company went from Times Mirror to Reed-Elsevier, was designed to be a tax-free event.
Times Mirror ended up with $1.38 billion when the deal was completed. It argued in Tax Court that the transaction was a “corporate restructuring.” Times Mirror, then led by Chairman and CEO Mark Willes, later structured a similar deal to dispose of a health publishing subsidiary.
In 2001, Internal Revenue Service (IRS) issued a legal opinion contending the deals were taxable sales. A hearing in Tax Court was held last December in Los Angeles.
The Tribune Co. is, of course, appealing.
What does a billion dollars mean for a company like the Tribune Co.? Well, LAT revenue last year was $1.07 billion (and people think the paper is worth somewhere north of $3 billion). So it’s as if a whole year of its biggest newspaper’s revenue was washed away. (Well, not exactly, because a lot of the liability will be covered by bonds the company issued over the summer in anticipation of an unfavorable court decision. But still, it’s a lot of money.)