8-KOther Events

TE Connectivity plc 8-K Report, Corporate Update (Jan 19, 2016)

Filed January 19, 2016For Securities:TEL

Summary

TE Connectivity plc (TEL) announced a significant development concerning its historical tax dispute with the IRS, stemming from its 2007 separation from Tyco International. On January 15, 2016, Tyco International, as the Audit Managing Party, entered into Stipulations of Settled Issues with the IRS to resolve intercompany debt matters for audit cycles 1997-2000 before the U.S. Tax Court. This resolution is contingent on the IRS applying the same framework to subsequent audit cycles (2001-2007) and the Joint Committee on Taxation's review. If finalized, this settlement is expected to resolve all aspects of the intercompany debt dispute for the covered audit periods. The total cash payment to the IRS is estimated between $475 million and $525 million, including interest and penalties. Under the Tax Sharing Agreement, TE Connectivity's share is projected to be between $147 million and $163 million. Importantly, the company anticipates no additional charges, as it had previously established sufficient reserves for this obligation. The payment is expected within the next six months.

Key Highlights

  • 1TE Connectivity (TEL) is addressing a historical tax dispute related to intercompany debt for audit cycles 1997-2000 and 2001-2007.
  • 2A settlement has been proposed with the IRS, initiated by Tyco International as the Audit Managing Party.
  • 3The settlement is contingent on consistent application of the resolution framework to subsequent audit cycles and review by the Joint Committee on Taxation.
  • 4The total estimated cash payment to the IRS is between $475 million and $525 million, inclusive of interest and penalties.
  • 5TE Connectivity's estimated share of the payment is between $147 million and $163 million, based on a Tax Sharing Agreement.
  • 6The company expects no additional charges as sufficient reserves have already been recorded.
  • 7Payment is anticipated within the next six months.

Frequently Asked Questions

The filing addresses TE Connectivity's participation in a settlement with the IRS to resolve a long-standing dispute concerning intercompany debt for U.S. income tax audit cycles spanning from 1997 to 2007. This dispute originated from the company's separation from Tyco International in 2007.

TE Connectivity's estimated share of the total settlement payment to the IRS is expected to be between $147 million and $163 million. The total settlement amount to the IRS is projected to be between $475 million and $525 million, including interest and penalties.

No, TE Connectivity does not expect to recognize any additional charges as a result of this settlement. The company had previously recorded sufficient reserves to cover its obligations under this dispute and the Tax Sharing Agreement.

The company expects the payment to be made to the IRS, and among the parties to the Tax Sharing Agreement, within the next six months from the filing date of this report (January 19, 2016).