Office Depot 2011 Annual Report Download - page 29

We file a U.S. federal income tax return and other income tax returns in various states and foreign jurisdictions.
With few exceptions, we are no longer subject to active U.S. federal, state or local income tax examinations for
years before 2009. The U.S. federal tax returns for 2009, 2010 and 2011 are under review. Significant
international tax jurisdictions include the U.K., the Netherlands, France and Germany. Generally, we are subject
to routine examination for years 2006 and forward in these foreign jurisdictions. It is reasonably possible that
some audits will close within the next twelve months which could result in a decrease of as much as $2.6 million
or an increase of as much as $1.0 million to our accrued uncertain tax positions.
As part of the ongoing 2009 and 2010 audits, the U.S. Internal Revenue Service (“IRS”) has proposed a deemed
royalty assessment from our foreign operations with a tax and penalty amount of approximately $126
million. The company disagrees with this assessment and, based on the technical merits of this issue, believes
that no accrual is required at this time. The company is working with its outside tax advisors and the IRS to
resolve this dispute in a timely manner. To the extent the IRS were to prevail on this issue, the income statement
and cash flow impact may be lowered because of available net operating losses and other deferred tax assets.
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