DELPHI 2013 Annual Report Download - page 117

95
Tax Return Filing Determinations and Elections
Delphi Automotive LLP, which acquired certain 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. The
Company believes the Internal Revenue Service (the “IRS”) may assert that Delphi Automotive LLP, and as a result Delphi
Automotive PLC, should be treated as a domestic corporation for U.S. federal income tax purposes, retroactive to the
Acquisition Date. If Delphi Automotive LLP were treated as a domestic corporation for U.S. federal income tax purposes, the
Company expects that, although Delphi Automotive PLC is incorporated under the laws of Jersey and a tax resident in the
U.K., it would also be treated as a domestic corporation for U.S. federal income tax purposes.
Delphi Automotive LLP filed U.S. federal partnership tax returns for 2009, 2010 and 2011. In light of the Notice, the IRS
is currently reviewing whether Section 7874 applies to Delphi Automotive LLP’s acquisition of the automotive supply and
other businesses of the Predecessor. The Company believes, after consultation with counsel, that neither Delphi Automotive
LLP nor Delphi Automotive PLC should be treated as a domestic corporation for U.S. federal income tax purposes, and intends
to vigorously contest any assertion by the IRS to the contrary, including through litigation if the Company were unable to reach
a satisfactory resolution with the IRS. However, no assurance can be given that the IRS will not contend, or that a court would
not conclude, that Delphi Automotive LLP, and therefore Delphi Automotive PLC, should be treated as a domestic corporation
for U.S. federal income tax purposes. No accrual for this matter has been recorded as of December 31, 2013.
If these entities were treated as domestic corporations for U.S. federal income tax purposes, the Company would be
subject to U.S. federal income tax on its worldwide taxable income, including distributions, as well as deemed income
inclusions from some of its non-U.S. subsidiaries. This could have a material adverse impact on our income tax liability in the
future. However, the Company may also benefit from deducting certain expenses that are currently not deducted in the U.S. As
a U.S. company, any dividends we pay to non-U.S. shareholders could also be subject to U.S. federal income tax withholding at
a rate of 30% (unless reduced or eliminated by an income tax treaty), and it is possible that tax may be withheld on such
dividends in certain circumstances even before a final determination has been made with respect to the Company's U.S. income
tax status. In addition, we could be liable for the failure by Delphi Automotive LLP to withhold U.S. federal income taxes on
distributions to its non-U.S. members for periods beginning on or after the Acquisition Date.
15. SHAREHOLDERS’ EQUITY AND NET INCOME PER SHARE
Overview
On May 19, 2011, Delphi Automotive PLC was formed as a Jersey public limited company, and had nominal assets, no
liabilities and had conducted no operations prior to its initial public offering. On November 22, 2011, in conjunction with the
completion of its initial public offering, all of the outstanding equity of Delphi Automotive LLP was exchanged for
328,244,510 ordinary shares, par value $0.01 in Delphi Automotive PLC. As a result, Delphi Automotive LLP became a
wholly-owned subsidiary of Delphi Automotive PLC, and subsequent to the exchange, Delphi Automotive PLC completed the
initial public offering of 24,078,827 ordinary shares by the selling shareholders for an aggregate purchase price of
approximately $530 million. Delphi Automotive PLC did not receive any proceeds from the offering, and incurred transaction
fees and expenses of approximately $44 million.
Immediately prior to the exchange of membership interests for ordinary shares and the completion of the initial public
offering, there were 344,495 Class B and 24,000 Class E-1 membership interests outstanding. Substantially all of the
membership interests were exchanged for 326,306,261 ordinary shares and 1,938,249 ordinary shares of Delphi Automotive
PLC, respectively. Additionally, in conjunction with the Acquisition on October 6, 2009, there were also 1,750,000 Class A and
100,000 Class C membership interests issued and outstanding until March 31, 2011, when all Class A and Class C membership
interests were redeemed. See “Class A and Class C Membership Interests Redemption” below for additional information.
Net Income Per Share
Basic net income per share is computed by dividing net income attributable to Delphi by the weighted average number of
ordinary shares outstanding during the period. Diluted net income per share reflects the weighted average dilutive impact of all
potentially dilutive securities from the date of issuance and is computed using the treasury stock method by dividing net income
attributable to Delphi by the diluted weighted average number of ordinary shares outstanding. For all periods presented, the
calculation of net income per share contemplates the dilutive impacts, if any, of the Company’s share-based compensation
plans. Refer to Note 21. Share-Based Compensation for additional information. For all periods presented, the effect of the VCP
awards was anti-dilutive and therefore excluded from the calculation of diluted net income per share, as discussed in Note 21.
Share-Based Compensation.