How Microsoft avoided billions in taxes, and what the GOP says it will do about it

The gimmick was entirely legal. According to the Senate's report, the software company's lawyers were channeling its profits from sales all over the country through the Puerto Rican operation, getting Microsoft out of about $1.5 billion in taxes a year.

It was the kind of scheme that designers of congressional Republicans' tax proposal hope to eliminate. The vast sums Microsoft saved hint at how much money is at stake for corporations that rely on similar strategies to reduce their taxes, which are especially common among technology firms and other companies with valuable brands, patents and copyrights.

Understanding the uncertain and potentially disruptive consequences of the GOP plan, known as a "border adjustment tax," has become an urgent priority for U.S. firms -- not just in Silicon Valley, but throughout the corporate sector, said John Gimigliano, a principal at KPMG in Washington.