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Lloyds General Corporate Litigation Reporter

Largest Tax Claims

Reynolds American Inc., Intel Corp., and American Beverage Co. are the top three companies facing the highest tax assessments, disallowances and claims by different tax agencies for the Corporate Litigation Reporter publication period Jan. 1 to July 25, 2007.

Company Remarks
Reynolds American Inc.
US$2.4 billion to US$2.9 billion
Published April 17, 2007
Reynolds American Inc.'s Master Settlement Agreement Phase II obligations established in 1999 will be continued as scheduled through the end of 2010 but will be offset against the tobacco quota buyout obligations under the Fair and Equitable Tobacco Reform Act of 2004.

RAI's operating subsidiaries incurred US$81 million in 2005 related to assessments from quota tobacco stock liquidation.

RAI's operating subsidiaries will record the FETRA assessment on a quarterly basis upon required notification of assessments. Its operating subsidiaries estimate that their overall share of the buyout will approximate US$2.4 billion to US$2.9 billion prior to the deduction of permitted offsets under the MSA.
Intel Corp.
US$2.2 billion
Published March 29, 2007
Intel Corp.’s appeal of the Internal Revenue Service’s Tax Assessment for the Company’s tax returns for the years 1999 through 2005 regarding the amounts reflected on those returns as a tax benefit for its export sales is still pending.

The Company's federal income tax due for 1999 through 2005 could increase by about US$2.2 billion, plus interest.
American Beverage Company
US$1.56 billion
Published July 19, 2007
American Beverage Company - AmBev estimates about BRL2.9 billion Published US$1.56 billion) total exposures of possible Published but not probable) losses in connection with assessments from Brazilian federal tax authorities relating to earnings of its foreign subsidiaries.

During the first quarter of 2005, the Company received the assessments from the Brazilian federal tax authorities relating to its foreign subsidiaries, in the total amount of about BRL2.9 billion.
Unibanco Holdings S.A.
approximately US$964.980 million
Published July 6, 2007
Unibanco Holdings S.A., as of Dec. 31, 2006, has provided about BRL1.867 billion in connection with its pending tax disputes, according to a Company report, on Form 20-F, filed with the U.S. Securities and Exchange Commission on June 18, 2007.

The Company is involved in several tax disputes, including judicial lawsuits and administrative proceedings, mainly relating to the constitutionality and legality of certain taxes imposed on the Company by the Brazilian government.
Brazilian Distribution Company
approximately US$726.103 million
Published July 18, 2007
Brazilian Distribution Company’s administrative appeal to a suit on ICMS - State Value-Added Tax on Sales and Services is still pending.

The State of Sao Paulo issued tax assessment notices charging credits of ICMS Published State Value-Added Tax on Sales and Services) based on the presumption that those credits were collectible, considering that tax reporting data would not be in accordance with electronic files data concerning the transactions.

The amount involved is BRL1.4 billion.
Avon Products Inc.
approximately US$564 million
Published April 26, 2007
Avon Products Inc. discloses in its latest Annual Report filed with the U.S. Securities and Exchange Commission that it is taking further appeal on a 2005 unfavorable first administrative level decision with respect to its appeal of the December 2004 additional tax assessment from the Brazilian tax authorities.

The assessments assert tax deficiencies during portions of the years 1997 and 1998 of US$97 million, plus penalties and accruing interest totaling US$175 million at the exchange rate on Dec. 31, 2006.

In December 2003, an additional assessment was received in respect of excise taxes for the balance of 1998, totaling US$122 million at the exchange rate on Dec. 31, 2006, and asserting a different theory of liability based on purported market sales data.

In December 2004, an additional assessment was received in respect of excise taxes for the period from January 1999 to December 2001, totaling US$267 million at the exchange rate on Dec. 31, 2006, and asserting the same theory of liability as in the December 2003 assessment.
ConocoPhillips
about US$544.5 million
Published June 22, 2007
Petroleos de Venezuela, S.A., Venezuela’s national oil company, has assumed operational control of ConocoPhillips’ Hamaca and Petrozuata heavy-oil joint ventures and its Corocoro oil production risk contract under development effective May 1, 2007.

On May 11, 2007, Seniat tax authority charged Petrozuata oil project with a tax claim of more than US$465 million and the Hamaca project a US$79.5 million claim.
Embraer-Empresa Brasileira de Aeronautica S.A.
US$523.6 million
Published June 6, 2007
Unibanco Holdings S.A.
approximately US$488.715 million
Published July 6, 2007
Embraer-Empresa Brasileira de Aeronautica S.A. obtained, as of December 31, 2006, preliminary injunctions permitting it not to pay certain taxes totaling US$523.6 million including interest.

Unibanco Holdings S.A. stated that it will maintain a BRL942 million provision, allocated as of Dec. 31, 2006, for PIS and COFINS tax disputes.
Synopsys Inc.
US$476.8 million
Published June 29, 2007
Synopsys Inc. awaits the ruling to the appeals process concerning the Internal Revenue Service's proposed assessment of net tax deficiency began in the second quarter of fiscal 2007, according to the Company's latest Quarterly Report filed on Form 10-Q with the U.S. Securities and Exchange Commission.

On June 8, 2005, the Company received a Revenue Agent's Report in which the IRS proposed to assess a net tax deficiency for fiscal years 2000 and 2001 of about US$476.8 million, plus interest.
Telesp Holding Co.
approximately US$410.376M
Published May 28, 2007
Telesp Holding Co. continues to contest several tax deficiency assessments issued by the Instituto Nacional da Seguridade Social, National Institute of Social Security, dated as of Dec. 20, 2005, and relating to the period between May 1995 and December 1998, that demanded payment of social security contribution amounts.

The Company’s tax advisors have opined that the amount of BRL791 million is a possible risk, given jurisprudence in favor of maintaining this action solely against the Company.
CEMEX S.A.B.
US$370 million
Published July 24, 2007
A suit filed by the Mexican tax authorities of several tax assessments against CEMEX S.A.B. de C.V. and some of its subsidiaries in Mexico is pending resolution. The claim relates to different tax periods in a total amount of approximately MXN4 billion Published US$370 million) as of March 31, 2007.
Cadence Design Systems Inc.
US$318 million
Published March 28, 2007
Cadence Design faces US$324 million proposed aggregate tax deficiency for the tax years 2000 through 2002 by the Internal Revenue Service.

Cadence Design is seeking resolution of this tax deficiency issues through the Appeals Office of the IRS.
Endesa S.A.
approximately US$268.008 million
Published June 29, 2007
Endesa S.A.’s Brazilian subsidiary, Ampla Energia e Servicos S.A., won an injunction against the Federal Government of Brazil, which stated that Ampla Energia was not obliged to pay the Contribuicao para o Financiamento da Seguridade Social Published contributions to the social security system).

This tax is based on revenues earned from the provision of electric power services. The Court of Appeal reaffirmed the prior court’s decision and stated it was final and in 1997 the Federal Government of Brazil brought an “Acao Rescisoria,” a special claim that allows the Court to nullify the prior final judgment and retry the case. The amount in dispute is approximately EUR195 million.
SUEZ
approximately US$258.082 million
Published July 18, 2007
SUEZ continues to contest the Special Inspection Department of the Belgian tax authorities’ EUR188 million claim from SUEZ-Tractebel SA, concerning past investments in Kazakhstan.
Brazilian Petroleum Corp.
US$253 million
Published July 11, 2007
Brazilian Petroleum Corp. faces Rio de Janeiro state finance authorities’ Tax Assessment in connection with State Value-Added Tax related to the Sinking of P-36 Platform.

The maximum exposure including monetary restatement for the Company as of Dec. 31, 2006, is US$253 million.

The maximum exposure including monetary restatement for the Company as of Dec. 31, 2006, is US$253 million.
Brazilian Petroleum Corp.
US$227 million
Published July 11, 2007
Rio de Janeiro state finance authorities filed a Tax Assessment against the Company in connection with II and IPI Tax contesting the tax classification as Other Electricity Generation Groups for the import of the equipment belonging to the thermoelectric power station TERMORIO.

The maximum exposure including monetary restatement for the Company as of Dec. 31, 2006, is US$227 million.
American Beverage Company
US$226 million
Published July 19, 2007
American Beverage Company - AmBev, as of April 30, 2007, had about 2,950 tax claims pending, including judicial and administrative proceedings, it states in its Annual Report on Form 20-F filed with the Securities and Exchange Commission on July 9, 2007. Most of the claims relate to Brazil’s ICMS value added tax and the IPI excise tax.

The Company has made provisions of BRL421 million (about US$226 million) in connection with those tax proceedings for which there is a probable chance of loss.
Telesp Holding Co.
approximately US$220.440 million
Published May 28, 2007
Telesp Holding Co. still faces three administrative violation suits by the Sao Paulo state treasury secretary in order to collect amounts allegedly due as state value-added tax, the Imposto sobre Circulacao de Mercadorias e Servicos, in connection with international long-distance services.

The aggregate amount of the lawsuits is BRL424.9 million
Brazilian Petroleum Corp.
US$203 million
Published July 11, 2007
Brazilian Petroleum Corp.’s appeal from the trial court ruling with respect to Rio de Janeiro state finance authorities’ Tax Assessment against the Company in connection with Import Tax and Federal VAT related to the Sinking of P-36 Platform still pending.

The maximum exposure including monetary restatement for the Company as of Dec. 31, 2006, is US$203 million.
Bausch & Lomb Inc.
US$200 million
Published Feb. 15, 2007
Bausch & Lomb Inc. could have increased tax liabilities for Wilmington Partners L.P. for the tax periods ended June 4, 1999 and Dec. 25, 1999 by more than US$200 million, plus penalties and interest.

Bausch & Lomb continues to challenge the tax adjustments proposed by the Internal Revenue Service regarding the tax periods.

Information presented herein details the biggest monetary demands as reported in the Lloyd's Corporate Litigation Reporter. To get the news when it happens, as it happens, subscribe to Lloyd's Corporate Litigation Reporter here.