New tax trouble for Symantec

Symantec is continuing to grapple with US federal tax woes.

Symantec’s US-based CFO James Beer told Wall Street analysts that a “human error” resulted in the company failing to file a timely tax extension that could end up costing the security-storage giant US$130 million.

Beer said Symantec is unable to confirm a lower tax rate on a distribution made from a Veritas foreign subsidiary due to the “failure to file a timely extension.”

"The failure to file the extension represents a human error and a breakdown in our tax controls," said Beer, who took the top financial job at Symantec several months ago.

“Right at the top of my priorities list is making sure that our controls are robust and fully utilised. And that the financing team is properly skilled and resourced as we move into the new fiscal year."

Beer said the Symantec tax department has suffered significant attrition in the wake of the blockbuster US$10.25 billion Veritas acquisition, leaving those remaining tax department employees with "significantly increased workloads.”

Beer has recently hired an experienced tax partner from a big four accounting firm to lead the tax group. That new boss is looking at implementing further changes, he said. In addition, Symantec has recently hired a senior vice president of finance operations.

“We are seeking a ruling from the IRS on this matter,” said Beer. “If we are unable to obtain verification from the IRS that we are eligible for the lower rate of tax on the distribution we will be required to pay additional US taxes totalling $130 million."

The US$130 million tax issue could impact a separate Internal Revenue Dispute, said Beer. The IRS is asking Symantec to pay US$900 million in back taxes from the Veritas acquisition. If Symantec is forced to pay the US$130 million, it would reduce the taxes that the IRS is seeking under the merger tax dispute, said Beer.

The tax disclosure issue came after Beer warned that the company is considering making changes that could lower recognised enterprise revenue by US$200 million in fiscal 2007.

That effort is aimed at merging enterprise security and storage availability buying programs, he said, which would result in some enterprise revenue being recognised on a prorated basis over the term of the license. The maintenance accounting license change would drive US$40 million of the US$200 million changes, he said.