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Table of Contents
Medtronic plc
Notes to Consolidated Financial Statements (Continued)
122
On September 2, 2014, the U.S. Department of Health and Human Services, Office of Inspector General and the U.S. Attorney’s
Office for the Northern District of California, issued a subpoena requesting production of documents relating to sales and marketing
practices associated with certain of ev3’s peripheral vascular products. The Company has not recorded an expense related to
damages in connection with this matter, because any potential loss is not currently probable or reasonably estimable under U.S.
GAAP. Additionally, the Company cannot reasonably estimate the range of loss, if any, that may result from this matter.
Income Taxes
In March 2009, the U.S. Internal Revenue Service (IRS) issued its audit report on Medtronic, Inc. for fiscal years 2005 and 2006.
Medtronic, Inc. reached agreement with the IRS on some, but not all matters related to these fiscal years. On December 23, 2010,
the IRS issued a statutory notice of deficiency with respect to the remaining issues. Medtronic, Inc. filed a petition with the U.S.
Tax Court on March 21, 2011 objecting to the deficiency. During October and November 2012, Medtronic, Inc. reached resolution
with the IRS on various matters, including the deductibility of a settlement payment. Medtronic, Inc. and the IRS agreed to hold
one issue, the calculation of amounts eligible for the one-time repatriation holiday, because such specific issue was being addressed
by other taxpayers in litigation with the IRS. The remaining unresolved issue for fiscal years 2005 and 2006 relates to the allocation
of income between Medtronic, Inc. and its wholly-owned subsidiary operating in Puerto Rico, which is one of the Company's key
manufacturing sites. The U.S. Tax Court proceeding with respect to this issue began on February 3, 2015 and ended on March 12,
2015. The U.S. Tax Court issued its opinion on June 9, 2016. Please see Note 18 for additional information regarding this subsequent
event.
In October 2011, the IRS issued its audit report on Medtronic, Inc. for fiscal years 2007 and 2008. Medtronic, Inc. reached agreement
with the IRS on some but not all matters related to these fiscal years. During the first quarter of fiscal year 2016, the Company
finalized its agreement with the IRS on the proposed adjustments associated with the tax effects of the Company's acquisition of
Kyphon Inc. (Kyphon). The settlement was consistent with the certain tax adjustment recorded during the fourth quarter of fiscal
year 2015. The significant issues that remain unresolved for these tax years relate to the allocation of income between Medtronic,
Inc. and its wholly-owned subsidiary operating in Puerto Rico.
In April 2014, the IRS issued its audit report on Medtronic, Inc. for fiscal years 2009, 2010, and 2011. Medtronic, Inc. reached
agreement with the IRS on some but not all matters related to these fiscal years. The significant issues that remain unresolved
relate to the allocation of income between Medtronic, Inc. and its wholly-owned subsidiary operating in Puerto Rico, and proposed
adjustments associated with the tax effects of its acquisition structures for Ardian, CoreValve, Inc., and Ablation Frontiers, Inc.
The Company disagrees with the IRS and will attempt to resolve these matters at the IRS Appellate level, however, it will proceed
through litigation, if necessary. The IRS continues to audit Medtronic, Inc.'s U.S. federal income tax returns for the fiscal years
2012 through 2014.
Covidien and the IRS have concluded and reached agreement on its audit of Covidien’s U.S. federal income tax returns for the
2008 and 2009 tax years. The IRS continues to audit Covidien’s U.S. federal income tax returns for the years 2010 through 2012.
Open periods for examination also include certain periods during which Covidien was a subsidiary of Tyco International plc (Tyco
International). The resolution of these matters is subject to the conditions set forth in the Tyco tax sharing agreement (Tax Sharing
Agreement). Tyco International has the right to administer, control and settle all U.S. income tax audits for periods prior to the
2007 separation.
The IRS has concluded its field examination of certain of Tyco International’s U.S. federal income tax returns for the years 1997
through 2000 and proposed tax adjustments, several of which also affect Covidien’s income tax returns for certain years after 2000.
Tyco International has appealed certain of the tax adjustments proposed by the IRS and has resolved all but one of the matters
associated with the proposed tax adjustments. The IRS has asserted that substantially all of Tyco International’s intercompany debt
originating during the years 1997 through 2000 should not be treated as debt for U.S. federal income tax purposes, and has
disallowed interest deductions related to the intercompany debt and certain tax attribute adjustments recognized on Tyco
International’s U.S. income tax returns. The Company disagrees with the IRS’s proposed adjustments and, on July 22, 2013, Tyco
International filed a petition with the U.S. Tax Court contesting the IRS assessment. On January 15, 2016, Tyco International, as
the audit managing party under the Tax Sharing Agreement, entered into Stipulations of Settled Issues with the IRS intended to
resolve all disputes related to the intercompany debt issues for the tax sharing participants for the 1997 - 2000 audit cycle, currently
before the U.S. Tax Court. The Stipulations of Settled Issues are contingent upon the IRS Appeals Division applying the same
settlement to all intercompany debt issues on appeal for subsequent audit cycles (2001 - 2007) and the approval of the U.S. Congress
Joint Committee on Taxation, if required. If finalized, the tentative resolution would cover all aspects of the controversy before
the U.S. Tax Court and the Appeals Division of the IRS. During the fourth quarter of fiscal 2016, the Company paid $10 million
to the IRS related to the settlement. In addition, the Company paid $183 million to TE Connectivity Ltd. and received $2 million
from Tyco International plc, representing its estimated share of the total amount payable to or receivable from the other Tax Sharing