Vistaprint 2014 Annual Report Download - page 85

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One of our subsidiaries, Vistaprint Limited (domiciled in Bermuda), is currently under income tax audit by
the IRS. In August 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 based on the IRS'
assertion that Vistaprint Limited had income effectively connected with a U.S. Trade or Business. In September
2012, we filed a protest stating our formal disagreement with the facts and technical conclusions presented in the
RAR and requesting the case be heard by the IRS Office of Appeals. We are currently in discussions with the Office
of Appeals and we anticipate resolution of this matter could happen sometime in fiscal year 2015.
One of our subsidiaries, Vistaprint USA, Incorporated, has received Notices of Assessment from the
Massachusetts Department of Revenue ("DOR") related to the tax years 2006-2008 and 2010-2011. The Notices
contain adjustments to taxable income for these years. The issue in dispute is whether the DOR has the right to
impute royalty income to Vistaprint USA in the years at issue associated with the use of certain intangible property
by Vistaprint Limited, even though that intangible property was transferred for a lump-sum payment to Vistaprint
Limited in an earlier year that is closed to adjustment by virtue of the governing statute of limitations. The
2006-2008 years were recently under review by the DOR Office of Appeals. In July, we received a Letter of
Determination from the Office of Appeals rejecting our Application for Abatement and upholding the DOR’s original
assessments. We are currently in the process of preparing a petition to have our case heard by the Massachusetts
Appellate Tax Board. The 2010-2011 years are currently still in Appeals. However, we expect these years to follow
a similar path to the 2006-2008 years. We continue to believe that the DOR’s position has no merit, and we intend
to contest these assessments to the fullest extent possible.
In October 2013, Vistaprint USA, Incorporated and the IRS signed an RAR which effectively concluded the
audit for the tax year 2011. We have included the impact of all RAR adjustments in our financial statements,
accordingly, which did not have a material impact to our net income. The audit of the income tax return for the tax
year 2012 continues to progress in the field examination stage.
One of our Canadian subsidiaries, Vistaprint North American Services Corp., was previously under income
tax examination by the Canada Revenue Agency ("CRA") for the 2006 tax year. In October 2013, the Company had
a formal hearing before the Appeals Division of the CRA. We were subsequently notified that the case has been
concluded and the audit assessments have been overturned resulting in no additional tax owed. There are no
adjustments to our income tax reserves required as a result of this finding.
We believe that our income tax reserves associated with these matters are adequate as the positions
reported on our tax returns will be sustained on their technical merits. However, final resolution is uncertain and
there is a possibility that the final resolution could have a material impact on our financial condition, results of
operations or cash flows.
15. Investment in Equity Interests
In the fourth quarter of fiscal 2014, we disposed of our investment in Namex Limited and its related
companies, as discussions with management identified different visions in the execution of the long-term strategic
direction of the business. We sold all of our Namex shares to Namex's majority shareholder and recognized a loss
of $12,681, in other income (expense), net in our consolidated statement of operations.
Prior to the sale, we had a 45% investment that was accounted for using the equity method, as the
investment was considered a variable interest entity and we were not the primary beneficiary. We recorded in net
income a proportionate share of the earnings or losses of Namex, as well as related amortization, with a
corresponding increase or decrease in the carrying value of the investment. For the years ended June 30, 2014 and
2013, in addition to the loss recognized on our sale, we recorded losses of $2,704 and 1,910, respectively,
attributable to Namex in our consolidated statement of operations.
16. Noncontrolling Interest
We have certain investments in which we enter into strategic business arrangements with third parties and
we have controlling interest. The balance sheet and operating activity of these entities are included in our
consolidated financial statements for the period ended June 30, 2014. We adjust the net income in our consolidated
statement of operations to exclude the noncontrolling interests proportionate share of results. We present the
proportionate share of equity attributable to the noncontrolling interests as temporary equity within our consolidated
balance sheet.
Form 10-K