1. 22 nd Annual High Technology Tax Institute The Crowne Plaza Cabaña 4290 El Camino Real Palo Alto, CA 94306 November 6 & 7

2. IRS Practice & Procedure- the High Tech Examinee Cherrilynn Lee Technical Advisor, High Technology Pre-Filing & Technical Guidance Large and Mid-Size Business Division Internal Revenue Service

3. FIN 48 – Accounting for Uncertainty in Income Taxes An Interpretation of FASB 109-Accounting for Income Taxes Issued in June 2006 Effective for the first financial accounting year beginning after December 15, 2006

4. Tax Benefit may be reflected in the financial statements only if… It is “more likely than not” that the company will be able to sustain its tax return position: Based on its technical merits Assuming the return will be examined, and Assuming the taxing authority will have all relevant facts

5. New IRS LMSB INITIATIVE: FIN 48 – Expedited Resolution of Uncertain Tax Positions Not intended to produce a different result in the resolution of tax issues than an examination One-time opportunity to adjust previously reported tax positions through equity with no effect to the income statement Will provide a quick resolution of a tax position prior to adoption of FIN 48 Will provide certainty with respect to some tax positions

6. Qualifications for the “FIN 48 – Expedited Resolution” Initiative Accounting period beginning after December 16, 2006 and before April 1, 2007 April 1, 2007 on, normal resolution processes are available on a non-expedited basis Qualifying Issues on: filed returns under examination filed returns not under examination not yet filed returns

7. Who/What is Ineligible for “FIN 48 – Expedited Resolution” Promoters of Listed Transactions Issues or transactions designated for litigation Issues or transactions in a court proceeding Issues or transactions that has a fraud penalty Issues or transactions in a tax-related criminal investigation Any other issue or transaction that in the discretion of the Service is not acceptable

8. “FIN 48 – Expedited Resolution” Timeline & Deadlines Deadline for seeking “expedited resolution” is 45 days prior to the financial accounting year- end date. (For example, the deadline for requesting resolution for a calendar year end is November 15) Timeline for working the issue must be jointly created with the IRS Date of the closing agreement between the IRS and TP may be no later than the last day of the TP’s current financial accounting year

9. Applying for FIN 48-EXPEDITED RESOLUTION Taxpayer will provide: Name, EIN, Accounting Year End Date TP plans to resolve the Issue Summary of Issue and Facts Perjury Statement Acknowledgement that the IRS can look at other tax issues

10. Taxpayer will eventually provide: All documents and all related legal and/or accounting opinions Relevant legal authorities including contrary authorities with citations Original documents that relate to TP’s Risk Assessment of the uncertain tax position Where and how the uncertain tax position is reported on the filed return or would be reported on a return yet to be filed Direct access to TP’s knowledgeable personnel

11. Who to Contact if you are interested in FIN 48-EXPEDITED RESOLUTION… Return Filed and Under Examination Team Manager Return Filed and Not Under Examination Email/FAX or overnight, Melanie Perrin Melanie.Perrin@irs.gov Fax: (202) 283-8406 IRS Attn: Melanie Perrin SE:LMSB:PFT:PFTS 801 9 th St. N.W. Washington, D.C. 20001

12. Who to Contact if you are interested in FIN 48-EXPEDITED RESOLUTION… Un-filed Returns, on site audit team Team Manager – request for a PFA If approved, the PFA fee will be secured Un-filed Returns, no on site audit team Follow normal PFA procedures as provided by Rev. Proc. 2005-12 Questions, call: Melanie Perrin (202)283-8408 Gregory Zielinski (636)940-6921

13. Pre-filing Agreements (PFA) Initiative Rev. Proc. 2005-12 Resolve specific issues before the tax return is filed Available on current, past, and future 4 taxable years Eligible issues: determination of facts, or the application of well-established legal principles to known facts

14. Excluded Issues: Transfer pricing issues Change in accounting method/period Pending request for a determination letter or ruling Contrary to previously issued determination letter or ruling to the Taxpayer Tax Shelter described in IRC 6662(d)(2)(C)(ii) Transactions that have not yet occurred

15. PFA User fee Only if selected for the program Rev. Proc. 2006-1 $50,000

16. Document Management Issues Information Document Requests (IDRs) Form 4564 Summonses Form 2039 Attorney-Client Privilege Privilege log

17. Audit Cycle Theory & Approach Statute Extensions Form 872-I Closing Agreements Form 906 Memorandums of Understanding