Merck has entered into a definitive agreement to settle its previously-disclosed tax disputes with the IRS. The agreement will end the IRS's examination of the company for the period 1993-2001.
Under the agreement, the final cash cost to Merck is expected to be approximately $2.3 billion, which covers federal tax, net interest after federal tax deductions and penalties. The impact for years subsequent to 2001 of the tax disputes is included in the settlement but remain open in all other respects. Merck has reserved for these items and this settlement is not expected to have an impact on annual earnings for 2007. The company concluded that it was in its best interests to settle and avoid any potential litigation.