The European Commission, in a report released today, made the preliminary finding that the Irish Revenue tax rulings of 1990 (effectively agreed in 1991) and 2007 in favor of Apple Inc. constitute state aid under EU law and therefore may be illegal.  Under Article 107(1) of the Treaty on the Functioning of the European Union (TFEU), “any aid granted by a Member State or through State resources in any form whatsoever which distorts or threatens to distort competition by favouring certain undertakings or the provision of certain goods shall be incompatible with the common market, in so far as it affects trade between Member States.”  The report states that Article 14 of Council Regulation (EC) No. 659/1999 “provides that all unlawful aid may be recovered from the recipient.”  The European Commission has requested that Ireland submit comments and provide further information within the next month to assist the European Commission in deciding whether Ireland must recoup back taxes from Apple.

In response to the European Commission’s preliminary findings, Senator Carl Levin (D-MI), chairman of the Senate Permanent Subcommittee on Investigations, released a statement in which he asserted that “Apple developed its crown jewels—lucrative intellectual property—in the United States, used a tax loophole to shift the profits generated by that valuable property offshore to avoid paying US taxes, then boosted its profits through a sweetheart deal with the Irish government.”