HP 2015 Annual Report Download - page 135

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believes it has valid positions supporting its tax returns and, if necessary, it will vigorously defend such matters.
HP has filed petitions with the U.S. Tax Court regarding certain proposed IRS adjustments regarding tax years 1999 through 2003 and is continuing to
contest additional adjustments proposed by the IRS for other tax years. The U.S. Tax Court ruled in May 2012 against HP regarding one of the IRS
adjustments for which HP has filed a formal Notice of Appeal. The Court proceedings are expected to begin in fiscal 2016.
Pre-acquisition tax years of HP's U.S. group of subsidiaries providing enterprise services through 2004 have been audited by the IRS, and all proposed
adjustments have been resolved. RARs have been received for tax years 2005, 2006, 2007 and the short period ended August 26, 2008, proposing total tax
deficiencies of $274 million. HP is contesting certain of these issues.
The IRS began an audit in fiscal 2013 of the 2010 income tax return for HP's U.S. group of subsidiaries providing enterprise services, and has issued an
RAR for the short period ended October 31, 2008 and the period ending October 31, 2009 proposing a total tax deficiency of $62 million. HP is contesting
certain of these issues.
With respect to major state and foreign tax jurisdictions, HP is no longer subject to tax authority examinations for years prior to 1999. HP is subject to a
foreign tax audit concerning an intercompany transaction for fiscal 2009. The relevant taxing authority has proposed an assessment of approximately
$733 million. HP is contesting this proposed assessment.
HP believes it has provided adequate reserves for all tax deficiencies or reductions in tax benefits that could result from federal, state and foreign tax
audits. HP regularly assesses the likely outcomes of these audits in order to determine the appropriateness of HP's tax provision. HP adjusts its uncertain tax
positions to reflect the impact of negotiations, settlements, rulings, advice of legal counsel, and other information and events pertaining to a particular audit.
However, income tax audits are inherently unpredictable and there can be no assurance that HP will accurately predict the outcome of these audits. The
amounts ultimately paid on resolution of an audit could be materially different from the amounts previously included in the Provision for taxes and therefore
the resolution of one or more of these uncertainties in any particular period could have a material impact on net income or cash flows.
HP has not provided for U.S. federal income and foreign withholding taxes on $47.2 billion of undistributed earnings from non-U.S. operations as of
October 31, 2015 because HP intends to reinvest such earnings indefinitely outside of the U.S. If HP were to distribute these earnings, foreign tax credits may
become available under current law to reduce the resulting U.S. income tax liability. Determination of the amount of unrecognized deferred tax liability
related to these earnings is not practicable. HP will remit non-indefinitely reinvested earnings of its non-U.S. subsidiaries for which deferred U.S. federal and
withholding taxes have been provided where excess cash has accumulated and HP determines that it is advantageous for business operations, tax or cash
management reasons.
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Source: HP INC, 10-K, December 16, 2015 Powered by Morningstar® Document Research℠
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