Symantec 2009 Annual Report Download - page 161

applicable tax authorities for a certain length of time following the tax year to which those filings relate. Our 2000
through 2008 tax years remain subject to examination by the Internal Revenue Service (“IRS”) for U.S. federal tax
purposes, and our 2004 through 2008 tax years remain subject to examination by the appropriate governmental
agencies for Irish tax purposes. Other significant jurisdictions include California, Japan, and India. As of April 3,
2009, we are under examination by the IRS, for the Veritas U.S. federal income taxes for the 2002 through 2005 tax
years. In addition, we are under examination by the California Franchise Tax Board for the Symantec California
income taxes for the 2004 through 2005 tax years. We are also under audit by the Japanese and Indian income tax
authorities for fiscal years 2004 through 2008, and 2004 through 2005, respectively.
We continue to monitor the progress of ongoing income tax controversies and the impact, if any, of the
expected tolling of the statute of limitations in various taxing jurisdictions. Considering these facts, we do not
currently believe there is a reasonable possibility of any significant change to our total unrecognized tax benefits
within the next twelve months.
On March 29, 2006, we received a Notice of Deficiency from the IRS claiming that we owe $867 million of
additional taxes, excluding interest and penalties, for the 2000 and 2001 tax years based on an audit of Veritas. On
June 26, 2006, we filed a petition with the U.S. Tax Court protesting the IRS claim for such additional taxes. In the
March 2007 quarter, we agreed to pay $7 million out of $35 million originally assessed by the IRS in connection
with several of the lesser issues covered in the assessment. The IRS agreed to waive the assessment of penalties.
During July 2008, we completed the trial phase of the Tax Court case, which dealt with the remaining issue covered
in the assessment. At trial, the IRS changed its position with respect to this remaining issue, which decreased the
remaining amount at issue from $832 million to $545 million, excluding interest. We filed our post-trial briefs in
October 2008 and rebuttal briefs in November 2008 with the U.S. Tax Court.
We strongly believe the IRS’ position with regard to this matter is inconsistent with applicable tax laws and
existing Treasury regulations, and that our previously reported income tax provision for the years in question is
appropriate. If, upon resolution, the final assessment differs from our tax provision, the adjustment including
interest, would be accounted for through income tax expense in the period the matter is resolved, when SFAS 141(R)
becomes effective in the first quarter of fiscal year 2010.
On September 5, 2006, we executed a closing agreement with the IRS with respect to the audit of Symantec’s
fiscal 2003 and 2004 federal income tax returns. The closing agreement represents the final assessment by the IRS
of additional tax for these fiscal years of approximately $35 million, including interest. Based on the final
settlement, a tax benefit of $8 million is reflected in the September 2006 quarter.
In July 2008, we reached an agreement with the IRS concerning our eligibility to claim a lower tax rate on a
distribution made from a Veritas foreign subsidiary prior to the July 2005 acquisition. The distribution was intended
to be made pursuant to the American Jobs Creation Act of 2004, and therefore eligible for a 5.25% effective
U.S. federal rate of tax, in lieu of the 35% statutory rate. The final impact of this agreement is not yet known since
this relates to the taxability of earnings that are otherwise the subject of the tax years 2000-2001 transfer pricing
dispute which in turn is being addressed in the U.S. Tax Court. To the extent that we owe taxes as a result of the
transfer pricing dispute, we anticipate that the incremental tax due from this negotiated agreement will decrease. We
currently estimate that the most probable outcome from this negotiated agreement will be $13 million or less, for
which an accrual has already been made. We made a payment of $130 million to the IRS for this matter in May
2006. We applied $110 million of this payment as a deposit on the outstanding transfer pricing matter for the tax
years 2000-2001.
The accounting treatment related to pre-acquisition unrecognized tax benefits will change when FAS 141(R)
becomes effective, which will be in the first quarter of our fiscal year 2010. At such time, any changes to the
recognition or measurement of unrecognized tax benefits related to pre-acquisition periods will be recorded through
income tax expense, while for fiscal 2009 and earlier the accounting treatment would require any adjustment to be
recognized through the purchase price as an increase or decrease to goodwill.
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SYMANTEC CORPORATION
Notes to Consolidated Financial Statements — (Continued)