The Next Generation of Global Tax Management The

The Next Generation of Global Tax Management The Chicago Tax Club – 55 th Annual Fall Seminar Copyright 2008 - True Partners November 19, Consulting. Copyright 2008 Intelysys, Red Moon Solutions, True Partner Consulting

The Complexity of the Global Tax Environment Globalization & velocity of business Increasingly complex transactions and organizational structures Heightened demand for accuracy Increased enforcement by taxing jurisdictions and regulatory bodies Drive toward currency Current and forecasted shortages of qualified personnel Copyright 2008 – True Partners Consulting, LLC © 2

Total Tax Function Risk Defined TTFR = (FR + OR + TTR) IR TTFR = Total Tax Function Risk FR = Finance Risk OR = Operational Risk = Process Risk + Knowledge Risk + Technology Risk TTR = Tax Technical Risk IR = Integration Risk 3 Copyright 2008 – True Partners Consulting, LLC ©

Total Tax Function Risk Defined (cont’d) Finance Risk: The quality and accuracy of data from accounting in accordance with existing financial reporting standards Process Risk: The failure points in existing processes Knowledge Risk: The risk of the loss of business intelligence and human error Technology Risk: Improper or poor utilization of technology Tax Technical Risk: The risk of misinterpreting or incorrectly applying tax statutes, regulations, case law, and financial reporting standards Integration Risk: The failure to properly link and 4 Copyright 2008 – True Partners Consulting, LLC © manage the flow of information

The Next Generation of Global Tax Management One Company’s Story 5 Copyright 2008 –

Company Profile Publicly traded manufacturer based in the United States Annual revenues in excess of $3 billion with sales in 50 states and Canada Locations in 20 states and Canada Legal entity structure comprises 50 entities Oracle Financial based on management reporting Tax Function Resources – Four full time professionals – One contractor – One intern 6 Copyright 2008 – True Partners Consulting, LLC ©

Tax Function Current State Significant Reliance on Excel – All tax processes: Income tax reporting and compliance, sales and use tax, and property tax are spreadsheet based – Spreadsheets are stored on network drive – Password protected files utilized Document Retention – Binders and hard copy files Workflow tool – Email Status Reporting – Email and meetings 7 Copyright 2008 – True Partners Consulting, LLC ©

Tax Function Current State (cont’d) Tax Reporting – In excess of 200 spreadsheets to develop provision – Not scalable for acquisitions – No linkage to financial reporting systems – Manual process prone to error Tax Planning and Analytics – Spreadsheet based and relatively inflexible for modeling – Inability to view the business in the same manner as the rest of operations – Not much time for analysis 8 Copyright 2008 – True Partners Consulting, LLC ©

Tax Function Current State (cont’d) Tax Compliance Functions – Income Tax Compliance • In Source Express • Only trial balance imported, all other data manually entered • Significant tax calculations performed in hundreds of spreadsheets – Sales and Use Tax • Manual processes - spreadsheets for completing sales tax returns • Taxability of purchases made by AP clerk, no automated tax decisions • Exemption certificates kept in a file cabinet by customer service, no review by tax • Tax rates updated manually, no defined process – Property Tax • Spreadsheet based and manual 9 Copyright 2008 – True Partners Consulting, LLC ©

Tax Function Change Agent Significant consulting fees in prior year end close to prepare and review tax reporting as a result of errors in spreadsheets Planned acquisition that would result in doubling in size of the organization Existing process would not scale to handle additional complexity associated with recent acquisitions Movement by external auditors toward eliminating reliance on spreadsheets for analytics and calculations 10 Copyright 2008 – True Partners Consulting, LLC ©

Tax Function Identified Risks Data flow risks – General ledger and trial balance not maintained at the legal entity level – Legal entity data from accounting reports are poorly understood and lacked transparency back to the general ledger and trial balance – Top-side entries that are not pushed down to the legal entities – Poor controls related to reconciliations and Oracle queries – Over 600 spreadsheets in use manipulating data – Redundant data and processes with the same data cut and pasted from other spreadsheets 11 Copyright 2008 – True Partners Consulting, LLC ©

Tax Function Identified Risks (cont’d) Data flow risks Copyright 2008 – True Partners Consulting, LLC © − Each tax function process ran own reports from Oracle resulting in data inconsistencies – Examples: • Apportionment for provision not the same as for compliance or FIN 48 • Sales by state from sales tax reporting different than apportionment • Wages by state from employment tax reporting different than apportionment – Data moved from spreadsheet to spreadsheet via cut and paste resulting in multiple versions of the truth – Updated data not necessarily carried through all spreadsheets – Both data and calculations stored on 12 spreadsheet resulting in the inability to lock down data during review

Tax Function Identified Risks (cont’d) Workflow Risks – No Work flow management in place – Coordination dependent on meetings and emails between the tax professionals – Lack of transparency of work progress resulted in deadline driven work flow – Management could not easily tell what capacity existed for special projects – Tasks transferred via email resulting in multiple versions of the same document and version control issues 13 Copyright 2008 – True Partners Consulting, LLC ©

Tax Function Identified Risks (cont’d) Process Risks – Process documentation nonexistent or dated – Critical institutional knowledge known only to key personnel, not documented – Controls established for only SOX relevant sub-processes – No milestones or signoffs other than on end product – No process for periodic review of calculations and data sources (SALY) – No retention of accounting data at the time of compliance – Paper binder based document retention made location difficult, control impossible 14 Copyright 2008 – True Partners Consulting, LLC ©

TTFR = (FR + OR + TTR) IR FR - Finance risk is high due to large amount of data manipulation in Excel. In addition, a high reliance on reports from source systems that were poorly understood by tax and rarely tested. OR – Operational Risk extremely high. – Reliance on a single tax professional and tax consultants presents an exposure to personnel shortage and turnover problems. – Lack of visibility of entire process, coupled with difficulty coordinating activities – Ineffective use of technology resulting highly manual processes prone with error TTR – High tax technical risk to do lack of planning and analysis. So much spent getting it done, no time to get it right. IR – High, tax processes ( Provision, State Compliance, Federal Compliance, Audit etc) treated as disconnected “waterfall” activities Copyright 2008 – True Partners Consulting, LLC © 15

The Next Generation Solution Process and technology changes occur in tandem and iteratively Processes and technology changes include all stakeholders; vendors, outside consultants and client All vendors and stakeholders work in a coordinated and cooperative effort: – – – Single vision Single set of requirements Single project plan Single success measure Single methodology Developed through multiple iterations rather than a single monolithic project 16 Copyright 2008 – True Partners Consulting, LLC ©

Tax Function Re-engineering (cont’d) Implemented a tax portal (cont’d) – Assignment of tasks to tax professionals • Visibility on progress on tasks • Visibility on capacity of tax department – Integrated into a single view • Calendar • Tasks • Tools • Documentation – Provide a single collaboration site for internal stakeholders and outside consultants – Captured institutional knowledge on processes in work flow – Reduced training time for new personnel Single tax calendar – Milestone and tasks associated with all deliverables Copyright 2008 – True Partners Consulting, LLC © 17

Tax Function Re-engineering (cont’d) Implemented OLAP Analytics and Reports – – – – Separated data from calculations Calculations are secure and auditable Reports are standard and provide drill down Eliminated need to cut and paste data Provided rapid analytics Provided integration with compliance tools (In Source) Eliminate spreadsheet risk by limiting ability to alter formulas – Reporting and analytics available across all tax lifecycles – Complete transparency to source accounting and tax data – Reduced ramp up time for new personnel by eliminating the need to understand spreadsheets – Reduced training time by using an intuitive MS Office interface Copyright 2008 – True Partners Consulting, LLC © 18

19 Copyright 2008 – True Partners Consulting, LLC ©

True Partners Consulting – Project Lead Tax Risk Management & Tax Advisory Defined Next Generation Solution – Mapped existing state of the tax function processes – Identified areas of operational risk, financial risk, tax technical risk, and integration risk – Determined and validated requirements with key stakeholders with a focus on risk management, increased efficiency, and value to the organization – Developed the desired state based on best practices and latest technology in order to achieve a fully integrated tax function 20 Copyright 2008 – True Partners Consulting, LLC ©

Tax Risk – Process Definition Mapped existing tax processes: – Tax Reporting • FAS 109, FIN 48, FAS 5 – Income Tax Compliance • International, federal, and state & local – Indirect Taxes • Sales & use, VAT/GST • Exemption certificate management – Property Taxes – Unclaimed Property – Significant Sub-Processes Copyright 2008 – True Partners Consulting, LLC © • Fixed assets; section 199; apportionment; intercompany transactions; transfer pricing; credits and incentives; earnings & profits; stock basis calculations; purchase accounting 21

Tax Risk – Process Definition (cont’d) Process mapping used to identify: – – – All source data Outputs of each step of the process Process weaknesses Automation points Financial and tax technical risk Interviewed all key stakeholders to develop desired state: – – – Tax function Accounting and finance Internal audit IT function Management & operations – External consultants Copyright 2008 – True Partners Consulting, LLC © 22

Tax Risk – Process Design Developed risk profile incorporating: – – Identified risk Management’s risk tolerance Cost benefit analysis Prioritization of objectives Re-engineered tax function based on: – Process mapping – Requirements established in stakeholder interview processes – Best practices – Risk profile 23 Copyright 2008 – True Partners Consulting, LLC ©

Tax Risk – Tax Function Re-engineered Execute re-engineering plan – – Develop formal plan Validate with key stakeholders Identify technology enablers Work with tax to communicate vision Provide project management – – Planning Change & scope control Project tracking and communication Change management 24 Copyright 2008 – True Partners Consulting, LLC ©

Tax Risk – Tax Function Re-engineered (cont’d) Validation of data & system results – – – Data cleansing to ensure quality of data Provide testing methodology Expected results testing & reconciliation Tax technical analysis Signoff on tax technical results Manage user acceptance of new process – – Copyright 2008 – True Partners Consulting, LLC © Change management communication plan Deployment Training Follow-up validation of user acceptance 25

Intelysys Project Role – Technology Automation Built Data Source – Designed & Built Accounting Data Store – Built Import Tool for loading Accounting Metadata – Built Import Tool for loading Trial Balance, GL, Fixed Asset, Property Tax data from several excel sheets into Accounting Data Warehouse – Built Tax Data Store – Provided exports for FAS 109 and Fin 48 Systems Built Web Enabled Tax Portal – Built e. File. Room (embedded electronic data storage) – Built e. Workflow (embedded Project Management) – Built Tax Issue Tracker – Built Tax Calendar and Integrated with Vertex Tax Calendar 26 – Integrated Power OLAP within e. Tax. Portal Copyright 2008 – True Partners Consulting, LLC ©

Tools for Tax Risk Management and Process Automation e. Tax. Portal - Single Point of Entry for all Tax Department related tools. Key Components of e. Tax. Portal: – e. Tax. File. Room: Tax Document System to Store e. Tax. Workflow: Tax Task Management – e. Tax. TER - Manage Budget vs. Actual, Time and Expense Reporting – e. Task. Manager: Tax Project Tasks, Scheduling and Resource Management – e. Legal. Entity: Legal Entity Manager – e. Tax. Calendar: Filing Dates Tracker by Entity – e. Tax. Work. Papers: Work Papers Management Tool 27 Copyright 2008 – Intelysys ©

e. Tax. Portal - Tax Portal for Today's Tax Department Embedded Tax Document Repository – Tax data categorization and taxonomy implementation – Search across projects, documents, tasks, attachments, messages – Application, Project, Document Access control and Field Level Security – Access Logs for SOX Compliance Embedded Tax Project Management – Assignment of tasks to tax professionals – Visibility on progress on tasks and capacity of tax department Personalized (Dashboards) for customization Tax Calendar for tracking filing deadlines & milestones Centralized communication & messaging Publish Tax department specific content Links to internal, external web pages and Tax 28 Tools Copyright 2008 – Intelysys ©

e. Tax. Portal - Open Architecture for Integration with Accounting and Tax Data Sources Integration with Accounting Data Import utility OLAP Integration for tax reporting and analysis – Provision, compliance, various tax types – Reports accessible via the e. Tax. Portal Outlook Integration Work Paper Integration Flexibility to integrate with existing tax technology utilized resulting in a fully integrated system 29 Copyright 2008 – Intelysys ©

Red Moon Solutions – Project Role Implementation & Reporting OLAP and BI Tools – Eliminate integration risk – Reduce data flow risk by creating a single source of data – Mitigate operation risk by providing flexible planning and analysis – Manage financial risk by providing the view of the data from tax to accounting – Control tax technical risk by separating the calculations from data SAP Expertise Experience with tax, OLAP and BI tool 33 Copyright 2008 – Red Moon Solutions ©

What is Business Intelligence & OLAP? Business Intelligence (BI) Programs and technologies for gathering, storing, analyzing and providing access to data to help enterprise users make better business decisions - Web definition On-Line Analytical Processing (OLAP) Provides ability to retrieve and analyze multidimensional, summarized views of business data to reveal business trends and statistics not directly visible in data directly retrieved from a relational database. - Web definition 34 Copyright 2008 – Red Moon Solutions ©

Multi-dimensionality account asset class location asset class entity lo ca t io n actual/

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The Next Generation of Global Tax Management TTFR = (FR + OR + TTR) IR By looking at tax risk in a holistic manner incorporating all components driving risk for a tax function, the next level of tax risk management can be achieved It is the proper alignment of people, process, technology within the tax function effectively integrated with all business processes that will allow an organization to achieve the next generation of global tax management 43 Copyright 2008 – True Partners Consulting, LLC ©

Today’s Presenters Andrea Gronenthal Khaja Syed Managing Director – True Partners Consulting LLC President – Intelysys, Inc. Chicago, IL Ashburn, VA Andrea. Gronenthal@TPCtax. com Khaja. Syed@Intelysys. com Telephone – 312 -835 -1184 Telephone – 703 -939 -0084 Joseph Ochoa Kelley Lear Senior Manager – True Partners Consulting LLC Managing Director – Red Moon Solutions, Inc. Chicago, IL Sarasota, FL Joseph. Ochoa@TPCtax. com Kelley. Lear@Red. Moon. Solutions. com Telephone – 813 -447 -9421 Telephone – 941 -379 -7108 44 Copyright 2008 – True Partners Consulting, LLC ©

Tax Advice Notice We are required by regulation to inform you that any tax advice contained in this communication (or in any attachment) is not intended or written to be used, and cannot be used by any taxpayer, for the purpose of: (i) avoiding U. S. federal, state, or local tax penalties or (ii) promoting, marketing, or recommending to another party any transaction or matter addressed in this communication (or any attachment). 45