Microsoft said in an 8-K filing on Wednesday that the Internal Revenue Service (IRS) notified the company in September that it was required to pay an additional $28.9 billion in taxes, as well as penalties and interest for tax years 2004 through 2013.

Microsoft said the issue involved the company's distribution of profits between different countries and jurisdictions between 2004 and 2013.
At issue is a 2012 IRS audit of transfer pricing. Transfer pricing is a way for companies to shift profits to tax havens to avoid U.S. corporate taxes. At the time, Microsoft had been shifting billions of dollars in profits to jurisdictions like Puerto Rico. Puerto Rico is a U.S. territory and imposes much lower corporate taxes than the United States.
Microsoft also said up to $10 billion in taxes it has already paid were not reflected in the IRS's proposed adjustments.
Microsoft plans to appeal
Microsoft said it disagrees with the IRS's tax audit findings and plans to appeal first in the IRS's internal process and will resort to judicial proceedings if necessary.
"Microsoft disagrees with these proposed changes and will appeal to the IRS, a process that is expected to take several years." Microsoft said in the filing. "We believe we have always complied with IRS regulations and paid the taxes we owe in the United States and around the world."
In a blog post, Microsoft Vice President Daniel Goff said the company has changed its practices since the years covered by the audit, so "the issues raised by the IRS are related to the past, but not to our current practices."
Microsoft also said that the $28.9 billion additional tax bill proposed by the IRS does not include taxes paid under the Tax Cuts and Jobs Act, which could reduce the total tax bill by as much as $10 billion.
Microsoft shares were down nearly 0.5% in after-hours trading on Wednesday. During the regular session, Microsoft closed up 1.23%, and the company's market value now stands at $2.47 trillion.