Cigarette maker Altria Group, Inc. (MO) has Tuesday reached a settlement with the Internal Revenue Service (IRS) to resolve tax disputes related to Philip Morris Capital Corp. leases. Altria expects to pay about $500 million in federal and state income taxes plus estimated interest. It will pay about $450 million in federal income taxes and $50 million in state taxes by the end of the second quarter of 2012.
The settlement, which is subject to court approval, resolves a previously disclosed tax dispute related to the federal income tax treatment for all prior tax years of certain leveraged lease transactions entered into by Altria's wholly-owned subsidiary Philip Morris Capital.
The tax dispute is related to federal income taxes paid on gains associated with leveraged lease transactions between 1996 and 2003.
The settlement will also see IRS not assessing any additional taxes or any penalties in any open tax year through the 2010 tax year related to the lease transactions, nor will the IRS impose penalties with respect to any prior tax years.
According to the settlement agreement, Altria has agreed to withdraw the pending litigation in federal court related to the tax treatment, and not seek refunds for federal taxes and interest previously paid.
The company also noted that it does not expect the tax settlement to affect its dividend or share repurchase plans.
Additionally, the Richmond, Virginia-based company also raised its reported earnings guidance for the full-year 2012, citing lower than estimated interest expense on tax underpayments. The company had earlier taken a one-time charge of $627 million or $0.30 per share related to the anticipated tax dispute settlement.
However, the actual charge will now be only about $500 million, leading to a one-time benefit of about $0.03 per share in the second quarter.
Altria now expects fiscal 2012 reported earnings in a range of $2.28 to $2.34 per share, up from the prior guidance range of $2.25 to $2.31 per share. However, the company reaffirmed its adjusted earnings forecast for the year in the range of $2.17 to $2.23 per share.
On average, 4 analysts polled by Thomson Reuters expect the company to report earnings of $2.21 per share for the third quarter. Analysts' estimates typically exclude special items.
Just a week back, Altria had raised its fiscal 2012 reported earnings outlook by $0.11 per share, citing a non-cash gain related to its equity stake in brewer SABMiller Plc (SBMRY.PK, SAB.L).
MO closed Tuesday's regular trading session at $31.76, down $0.09 or 0.28% on a volume of 7.57 million shares.
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