DELPHI 2011 Annual Report Download - page 132

Table of Contents
A reconciliation of the gross change in the unrecognized tax benefits balance, excluding interest and penalties is as follows:
Year ended
December 31,
2011
Year ended
December 31,
2010
Period from
August 19 to
December 31,
2009
Period from
January 1 to
October 6, 2009
(in millions) (in millions)
Balance at beginning of period $ 82 $ 83 $ — $ 79
Liabilities assumed in acquisition — — 80 —
Additions related to current year 43 9 10 1
Additions related to prior year 7 11 1 6
Reductions related to prior year (24) (19) (6) (10)
Reductions due to expirations of statute of limitations (6) (1) (1) (1)
Settlements-cash (3) (1) (1) —
Gain from reorganization — — — (75)
Balance at end of period $ 99 $ 82 $ 83 $ —
A portion of Delphi's unrecognized tax benefits would, if recognized, reduce its effective tax rate. The remaining unrecognized tax benefits relate to tax
positions for which only the timing of the benefit is uncertain. Recognition of these tax benefits would reduce the Company's effective tax rate only through a
reduction of accrued interest and penalties. As of December 31, 2011 and 2010, the amounts of unrecognized tax benefit that would reduce the Company's
effective tax rate were $68 million and $52 million, respectively. In addition, $19 million and $31 million for 2011 and 2010, respectively, would be offset by
the write-off of a related deferred tax asset, if recognized.
Delphi recognizes interest and penalties as part of income tax expense. Total accrued liabilities for interest and penalties were $15 million and $18
million at December 31, 2011 and 2010, respectively. Total interest and penalties recognized as part of income tax expense (benefit) was a decrease of $3
million, a decrease of $3 million, a decrease of $3 million and an increase of $1 million for the years ended December 31, 2011 and 2010, and for the periods
from August 19 to December 31, 2009 and January 1 to October 6, 2009, respectively.
Delphi files tax returns in multiple jurisdictions and is subject to examination by taxing authorities throughout the world. Taxing jurisdictions
significant to Delphi include the U.S., China, Brazil, France, Germany, Mexico, Poland and the U.K. Open tax years related to these taxing jurisdictions
remain subject to examination and could result in additional tax liabilities. In general, Delphi affiliates are no longer subject to income tax examinations by
foreign tax authorities for years before 2002. It is reasonably possible that audit settlements, the conclusion of current examinations or the expiration of the
statute of limitations in several jurisdictions could impact the Company's unrecognized tax benefits. Delphi expects a potential reduction in unrecognized tax
benefits over the next twelve months of approximately $22 million due to expected resolution with tax authorities.
Tax return filing determinations and elections
Delphi Automotive LLP, which acquired the automotive supply and other businesses of the Predecessor on October 6, 2009 (the "Acquisition Date"),
was established on August 19, 2009 as a limited liability partnership incorporated under the laws of England and Wales. At the time of its formation, Delphi
Automotive LLP elected to be treated as a partnership for U.S. federal income tax purposes. Prior to the Acquisition Date, the Internal Revenue Service (the
"IRS") issued Notice 2009-78 (the "Notice") announcing its intent to issue regulations under Section 7874 of the Internal Revenue Code of 1986, as amended
(the "Code"), with an effective date prior to the Acquisition Date. If regulations as described in the Notice are issued with the effective date indicated in the
Notice and with no exceptions for transactions that were subject to binding commitments on that date, we believe there is a significant risk that the IRS may
assert that Delphi Automotive LLP, and as a
130