Intel said the IRS recently proposed increasing the company's tax liability for 1999 and 2000. Although Intel said in the filing it would oppose the proposed adjustments, the company also said it may ultimately have to pay $600 million more for those two years, plus interest. The filing said that the IRS was also considering similar claims for subsequent years. .

The dispute relates to an export-tax credit related to chips that company produces in the United States and ships overseas for packaging and testing, said Chuck Mulloy, an Intel spokesman. "The issue is what constitutes manufacturing," said Mulloy, adding that Intel contends that manufacturing consists only of making the chip.

The credit was based on a policy created after a settlement of a similiar dispute between Intel and the IRS regarding the tax years 1991 to 1993, Mulloy said. The IRS is now re-examining the tax treatment of that issue, he said.

An IRS representative was unavailable for comment.