Marriott Settles ESOP Dispute with IRS

The hotel chain will pay $220 million in taxes and interest.

Marriott International said Friday that it has reached a $220 million settlement with the Internal Revenue Service and the Department of Labor following an IRS examination of its employee stock ownership plan.

The after-tax charge will total $54 million, or 13 cents per share, and reduce shareholder equity by $114 million in the second quarter, the company said.

“We are pleased to reach this compromise, bringing this dispute to a swift and final resolution using the IRS’s Fast Track Settlement process,” Arne M. Sorenson, Marriott’s executive vice president and CFO, said.

Marriott reported that it received a Notice of Proposed Adjustment from the IRS on March 1, 2007 that challenged most of the ESOP-related federal income-tax deductions claimed by the company.

Facing proposed taxes and penalties on those deductions, Marriott said at the time: “We believe that the IRS’ proposed adjustments are incorrect, intend to vigorously defend our positions and are examining various procedural alternatives for resolution of this matter.”

As a result of the settlement, Marriott will make cash payments to the U.S. Treasury and state tax jurisdictions, reflecting taxes and interest but no penalties.

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