Vistaprint 2013 Annual Report Download - page 80

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We elected to fund the transfer of Webs Intellectual Property using an installment obligation payable over a
7.5 year period. The decision to structure the transaction with an installment obligation was driven by financing and
cash flow considerations, and the terms of the installment obligation were determined on an appropriate arm's-
length basis. In compliance with local tax laws in the applicable jurisdictions, the tax liability associated with this
transfer qualified for installment treatment and, thus, the cash tax liability will be payable over the term of the
underlying installment obligation. Accordingly, the Company recorded a deferred tax liability for the entire tax
liability owed but not yet paid as of the date of the transaction with a corresponding asset in “Other Assets” to reflect
the deferred tax charge to be recognized over the expected remaining lives of the underlying assets as described
above.
As of June 30, 2013, undistributed earnings of our subsidiaries of $120,387 are considered to be
indefinitely reinvested. If, in the future, we decide to repatriate undistributed earnings from certain of these
subsidiaries in the form of dividends or otherwise, we could be subject to withholding taxes payable at that time.
Determination of the amount of withholding taxes that would be payable is not practicable due to the complexities
associated with this hypothetical calculation.
A reconciliation of the gross beginning and ending amount of unrecognized tax benefits is as follows:
Balance at June 30, 2011 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 2,496
Additions based on tax positions related to the current tax year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4,148
Additions based on tax positions related to prior tax years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (27)
Reductions due to audit settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (297)
Balance at June 30, 2012 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,320
Additions based on tax positions related to the current tax year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 250
Reductions based on tax positions related to prior tax years . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (234)
Reductions due to audit settlements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (654)
Balance at June 30, 2013 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,682
For the years ended June 30, 2013 and 2012, the amount of unrecognized tax benefits, if recognized, that
would affect the effective tax rate is $2,398 and $2,766, respectively. We recognize interest and, if applicable,
penalties related to unrecognized tax benefits in income tax expense. The accrued interest and penalties
recognized as of June 30, 2013 and 2012 were $241 and $320, respectively.
It is reasonably possible that a further change in the unrecognized tax benefits may occur within the next
twelve months related to the settlement of one or more audits. However, an estimated range of the impact on the
unrecognized tax benefits cannot be quantified at this time. We believe we have appropriately provided for all tax
uncertainties.
We conduct business in a number of tax jurisdictions and, as such, are required to file income tax returns in
multiple jurisdictions globally. The years 2007 through 2012 remain open for examination by the Internal Revenue
Service and the years 2005 through 2012 remain open for examination in the U.S. states and the various non-US
tax jurisdictions in which we file tax returns.
Vistaprint Limited (domiciled in Bermuda) is currently under income tax audit by the United States Internal
Revenue Service (“IRS”). On August 16, 2012, we received a Revenue Agent's Report (“RAR”) from the IRS
proposing tax assessments for the 2007 to 2009 tax years. The issue in dispute is the imposition of U.S. federal
income tax on effectively connected income associated with the IRS' assertion that Vistaprint Limited has a U.S.
Trade or Business. On September 17, 2012, we submitted to the IRS Examination team a written protest stating our
formal disagreement with the facts and technical conclusions presented in the RAR and requesting the case to be
heard by the IRS Office of Appeals. On August 8, 2013 the case was officially transferred to the IRS Office of
Appeals. We anticipate our hearing in Appeals to commence sometime during fiscal year 2014. Based on the
technical merits of this matter, we believe that our tax positions will be sustained. We plan to pursue all
administrative and, if necessary, judicial remedies with respect to this matter.
In March 2013, Vistaprint USA, Incorporated and the IRS signed an RAR which effectively concluded the
audit for tax years 2007 to 2010. We have included the impact of all RAR adjustments in our financial statements,
Form 10-K