Case 2:15-cv-00102-RSM Document 146-8 Filed 10/12/16 Page 1 of 19

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Roberts, Ryan
Wednesday, July 21, 2004 8:31 PM
George, Gregory L
RE: slides
PR restructure gig revised 0721041 rkr.ppt

Here is the updated slides.

> -----Original Message---->From: George, Gregory L
>Sent: Wednesday, July 21, 2004 11:14 AM
>To:
Roberts, Ryan
>Subject:
slides
>Importance: High

>
> « File: PR restructure gig revised 0720041 rkr.ppt »

>
>Gregory L. George
>Senior Manager-International Corporate Services glgeor_g_e@kpm_g,com
>206-913-6556 (direct)
>206-913-4444 (fax)

>
>Our advice in this communication is limited to the conclusions
>specifically set forth herein and is based on the completeness and
>accuracy of the above-stated facts, assumptions and representations.
>If any of the foregoing facts, assumptions or representations is not
>entirely complete or accurate our conclusions may be materially
>affected. In rendering our advice, we are relying upon relevant
>authorities that are subject to change, sometimes retroactively. We
>will not update our advice for subsequent changes to authorities or
>interpretations thereof.

>
>
>
>

Government
Exhibit
8
_____________

1

CONFIDENTIAL

KPMG MS IRS 0022035

 Case 2:15-cv-00102-RSM Document 146-8 Filed 10/12/16 Page 2 of 19

Planning Alternatives .in Puerto Rico
July 21. 2004
Brett. Weaver
Greg George
Stc.-c Lainoff

Jvlmrn1 Corwin
KPMG • Seattle

l

2

CONFIDENTIAL

KPMG_MS IRS 0022036

 Case 2:15-cv-00102-RSM Document 146-8 Filed 10/12/16 Page 3 of 19

Cm·rcnt Structure

• :'vJJci:u:-1,n Ptkmt1 Rkn (MS J:1.H!•th.l Hko"i

r~1m1:·n:ly 1::r.Hltifa..,w1..:~, CDs
hrnm..:'h op..:;mt!ng iH Pn~r\o J<.i\:~i

M,.,,.,,~•fi
Cor_pf,n\tion

• Cm1"l!tlt ;;s 1:a~ lJt'ht'Or i:~ h1v~t'·1I (1n S<!..,:.
:-Ur) -r..:-,?;,mc·., ·,dlkh ph,:~~-; 1.Jut c(,1::pl:::tdy rn
'.HHJ.~

2

2

3

CONFIDENTIAL

KPMG MS IRS 0022037

 Case 2:15-cv-00102-RSM Document 146-8 Filed 10/12/16 Page 4 of 19

Co11tinuh1g Opcrntio11s .in Puerto Rko -A.dnmtagcs

Continui11gopcrntio11s in Puc1io Rico may yield certain advan(agcs:
•

•
•

•

Offsh.orc nmnt1facll.u-ing in PR for the US market isolatC'.S tax
risks from profits deferred clsc,\hcre
US ta:-.: deform I may partially offset foregone Sec. 9J6 !a:-.: credit
Fc,v opcrntionul ch:mgcs required
Ivhcrnsoft gains expertise in dcfonal strategics for the US market

3

4

CONFIDENTIAL

KPMG MS IRS 0022038

 Case 2:15-cv-00102-RSM Document 146-8 Filed 10/12/16 Page 5 of 19

Co11th1ui.11g Opcn1tious in Puc,·to Ric~.1 - Key Issues

•

Operatiomtl Considerations
Tim: presentation a~sumes t!uit a :..tntus-quo ,rpprnn,;h v,n;, p.rdi~rnble

Cost Sharing Arrangernent
.. M}tPR. ni,mufactur1cs only

,1 pu.rtion of the CD:, frir fl'P. Sek,:t aod
EA« in the Ameli(;a · s
A,i .:rncli,. a co;,t ~,lrnrrng arrm1g(•n1ent h, produci or ~:cography ,vill
not be possibk \\'ithout signi!kant op0rntionid i:h.11wes

•"" .MS may c,,n,;iJ~-r mi ,1.m111gcnwnt with,\ minimum and maxi.mum
pun:linse ordt'.I co1llrnitui('.ni
• Sho1dd mc:-;~t, ,in:w$-fongHJ. fl;.!{JUil\~nwnt:~ und..::r

t.'<.1::;t .'½h:.1xJng n::gnl,,hou~
" ,,\chi(:.\'(:~ dc.~i_r~d r~,:;ult \:Vi.thou( vp..::.rat.ional ,uhangc:::

,.

-

Cw..1111n1itmenr. nrny he viewi::d a;::; :1 ~-::.p.ctr.:Jtll a;5~et.

MSPR fr,:,: to sdl. product to both rdakd and -i1Drnlakd

4

5

CONFIDENTIAL

KPMG MS IRS 0022039

 Case 2:15-cv-00102-RSM Document 146-8 Filed 10/12/16 Page 6 of 19

Co11th1ui.11g Opcn1tious in Puc,·to Ric~.1 - Key Issues

• Subp:u~t F
-

In order to med numufo,,turing: e:--:1e,:pt1011, will n,,,,d lo sp,•.,itfoally

idc:11til\ pwdw.:b .~old whidi me mnnu:fadun;d in Pnc.rto Ri<::o
• No kH\!}::.'r :tbJu to
Sdc:d-E.Y')

-

•

u,':!<.i

rnhn~ tn npproxJ.nl:1ti:J ~nk:s (i:.--:::-:;tk'f!. with

Addrt:ss rn:mufaduring branch issnt,~ ·with propo~t:d stn1,c.tn1'<:,;

ECI/l.JS trade or busi11ess
... :tvi:s co111 imt,'.s to 011 n third•pmty t:ontrnct n:urnl!ll1i;tL1rint:
•·· tv[S rn IPCo ;;. on{y k110,1·11 cuHtmner

•

Anticipated rc:\ised buy•in regulations
--· PnJpost,d ri::gulutions expcckd bv month :, t,nd

--- lrnpad

011

tim.mg

5

6

CONFIDENTIAL

KPMG MS IRS 0022040

 Case 2:15-cv-00102-RSM Document 146-8 Filed 10/12/16 Page 7 of 19

Co11th1ui.11g Opcn1tious in Puc,·to Ric~.1 - Key Issues

•

AYoiding the Sec. 20) PR tax penalties
--· Gcnc:rnlly cau lx: avoided 1nth prop,:r pl.wmi11g
~ Mny also lrnn:1it1011 to l 1122( b )(4 _; i111cstment~ without p<:.malt1·

•

Stn1cturc
--· Opc·rntional cttkicnc~·
~

E:tfoctiY•e tnx rat~
E>.:it :,lr,1kgy

6

7

CONFIDENTIAL

KPMG MS IRS 0022041

 Case 2:15-cv-00102-RSM Document 146-8 Filed 10/12/16 Page 8 of 19

Proposed Structure 1 --- Puerto Rico CFC

M,.,,.,,~•fi
l. ~\J~;, PUNf,O R(,,\{J (M 1\18 CntJ1) c:.::,m:dbiH<!:<

tht: ,tUf..~($ of PRB t1l½
!{fr·(; -.·ettH;~.in:,,:.

0

Cor_pf,n\tion

frl:t: {',I H !\-)\\' Ptw.1't1}

PR CFC.

i.1.i t'.-1.:.,(,']WflJ~"~

.fo:·

:;-tw.~k,
:::, PH \~F(:: l:11y:i•tHl~l th.::. ..J.\.i:J.llug r,;::..:hl:1.1]~}Y",
it1ta1:1g:i~h~:; wt:J1 n,:spt•N I.I) Hif: s.:,Jtw:Ftr.:.'
1:iu..1di:d.'J-that i( :tJH.rrnfa1.:tt1t\1,1,

7

8

CONFIDENTIAL

KPMG MS IRS 0022042

 Case 2:15-cv-00102-RSM Document 146-8 Filed 10/12/16 Page 9 of 19

Proposed Stn:11::tlm) l •--· .Puc•·to Rico CFC. cont.

,;b,m~..::, ,;i, FR (:Fe ~i:m:m,..;-~ M
i:,i),:,·.,11,; •::, t<1:,,n-11f':.i<.'.:i•1t!t•~ i:r.,:•'.•'ll•1:r•~ (1~, l'RH ditl

-:,:Cl {tp,·Y.}\('.i{!l'.l:~i

M,.,,.,,~•fi

~dldc:1· .-:;~c_ 1:UIS •'>~;',\iW'~

Cor_pf,n\tion

-- \IS l'u•rlo
[

Rko·-·1

ll!~,•

..........................

E-:.:t '','1Hdd J:kdy l't:O:•J!t ii: l:1;,.: •)li !tic: f';\lV ~If P:{

c~c ttl :\,_i:: u:n :riJ~ i:1- 7pM·::t;'r,11.

8

9

CONFIDENTIAL

KPMG MS IRS 0022043

 Case 2:15-cv-00102-RSM Document 146-8 Filed 10/12/16 Page 10 of 19

Proposed Stn:11::tlm) l •--· .Puc•·to Rico CFC. cont.

rJ•l/f1,1f1ie'>"trm1Vi'"
.U\ (',)H"P

;,.,.,,

Wftl1:'ftriwt:11·,.
)f~ Col j!
:({,

P°R ,\c-v.,:,)
_J':

f:lllol·IOlt}IC•l>

"fol:,j

:,:';')

p.,,,1:,i;,o;,•Vi;,/:,,:

Bt••;;b;,:,l Y~~• i·::

9

9

10

CONFIDENTIAL

KPMG MS IRS 0022044

 Case 2:15-cv-00102-RSM Document 146-8 Filed 10/12/16 Page 11 of 19

Pro1)0.sed Sh·uchmi 2 ... lPCo ·with Puerto Rico Branch

5. :\1,S:. ('mp :;;md rRI~ \.mT~'l' i::t(I :u:
with -th...: i1u~n.(.1 K!,m:i

ar::1\~{:'Jn<;l\l

Ill

lO

11

CONFIDENTIAL

KPMG MS IRS 0022045

 Case 2:15-cv-00102-RSM Document 146-8 Filed 10/12/16 Page 12 of 19

Pro1Joscd Structure 2 ,.. IPCo with Puerto Rko Brandi, cont.

N') c;d•.

1;?t,-.; fra;,1, 1 H:>•:>)

H ;\{~ {kc,~k:- t,.,1

11.n,r:r1,:sJ11.t..:t•m~'
:-;,)ti::'I

:tl(',)

l~rn,r.•~
Stn1,.;;11n·,,~:-i1:•;t~I rn;~r;,1tio11 :,n

C'S :a.nd PR wx

i,r:--;Tfr~.;: f(w

·

LI

ll

12

CONFIDENTIAL

KPMG MS IRS 0022046

 Case 2:15-cv-00102-RSM Document 146-8 Filed 10/12/16 Page 13 of 19

Pro1Joscd Structure 2 ,.. IPCo with Puerto Rko Brandi, cont.

)(. Ufo1oi' ,,~'.thi( Ww

Xt~ Cm•.9

W/thSb'l'l.;;tlhti'

\I-~

c:,xr

u•<:.,,.

'P,HH

[ ~1:.;1: f',\•ii:
!<:,):, I ~l' .•

f~¢!, t:t'
;,./11,·f:ff

1-'

12

13

CONFIDENTIAL

KPMG MS IRS 0022047

 Case 2:15-cv-00102-RSM Document 146-8 Filed 10/12/16 Page 14 of 19

.Proposed Structm·c 3 .., lPCo with Puerto Rico Branch & Dutch S,dcs Bnmd1

I.

1.

M~ (\'l~JJ Mld .PRB t~l1i'~ir !nt(qi!1
;:,ign:i::n-ii':nr -.,,;Jrh 1hr.' P11.i::n._--, Rk~1rn :,•tdr,~
:~ui'!-wrJtkii for a 1.i.~ '!J,,1bd,1y io t1ucnt,
Rl1.•(:
f'Rg ~~h,n;1Jdh~\, rn,,'"~111
<lq1,:,•noJJi:p, fti'.1' :,:;J::r..• 1.>f

2?,,,, I'\i
(•,P('"l.{H;~~lli-1

kn 11

p~n1,1d

,;,,ft I} t,t, 20 yl'.';:11'$,

ff'-(\.1 -t:;ito:bU~h1.~;-: $1 Dt\ld1 $:li.l'.:'':i b:l'1Hi.C:~l
(·'DSB"'i in lh,.:- 'N;d.li~·rlarn!)i 1md w.'.:!J

fr:m:-for

pd~'il!.~

rnliu~

,.1i·1 ,ij:.lJ'l:..id

ldt

<l~hhid,

u

l3

14

CONFIDENTIAL

KPMG MS IRS 0022048

 Case 2:15-cv-00102-RSM Document 146-8 Filed 10/12/16 Page 15 of 19

.Proposed Structm·c 3 .., lPCo with Puerto Rico Branch & Dutch S,dcs Bnmd1

•

t•:1, ·.~'I.it MN

th,r,1 H'('1) !(~vf'~ ,ktl<k!l tu

\_ffl.1.\'~H1 :!~'fl.\{;lln,~.

"«·r,o,,s. , .. ,,,_.,i,i,«w

ti,,

:~pJ.1:y i:1

lt,!'.I 2 t11r:1mli~ l<) t'.H1la\~ ::,H,\?,i'C1' JWl·rn:

f(r l'r:'.'g[f_\),e'

!f!,ll!rltt\1-c:O,l'iti),'. :1: NldL l•~f\11•~.

\\'.H1ki 21,;-,;:d 1~,

dt."-:-•d~ ,:,,·h\·:b~rH.<

14

15

CONFIDENTIAL

KPMG MS IRS 0022049

 Case 2:15-cv-00102-RSM Document 146-8 Filed 10/12/16 Page 16 of 19

Pm1wst~d Strncturc 3 --- lPCo 'With P1.wrto Rico Branch & .Dutch Sales Branch, cont.

tr'iN1·11111 S1r,~a11nJ

:~, ',),:,(\~-:,.

'.'tt:iiC1Jq1
:(K.1

~ ... ~\'I;,)\'.\~"•

U'h'h S'hUd<ln!

M,-;O,r1:i

)))(q_1

JI(<$

))SIJ

I'

('O(~
(J:',li$ ~•';<1.:J:

";\1~:<l ::.~.p~.(i .:,-:,
tow/ !,u~nJf!.'

........ ~ ~•)l •••••••••••••••••••••. :::.,o:: ........ _'.."!•.1l •••••••••••••••••••••• 1;. 1.,:::.:
I~~,:,
:1:'.l
:
!
: f:(J/iJ

;\~J.kf-'~.

{::':~

:J..1)

•••••••• 1:1:-1);

11

r~d: fi'
\fa•ki.P

1.5

15

16

CONFIDENTIAL

KPMG MS IRS 0022050

 Case 2:15-cv-00102-RSM Document 146-8 Filed 10/12/16 Page 17 of 19

1.

Cost Sha re kchnolog:,. and marketing intaugibks
Requires significant opcrationnl changes
Increases O\ crall bc.ucfit

2.

Cousider non-qualifkd cos! sharing techniques
New cost sharing and upcoming buy-in regulations can make
al tcnwtivc structures mzH'c beneficial.
Partn<::rship te,,;hnique~
Non-qual.i!fod co,,I: slrnnng m-r:mgGn1enl:~
O!her

1,

16

17

CONFIDENTIAL

KPMG MS IRS 0022051

 Case 2:15-cv-00102-RSM Document 146-8 Filed 10/12/16 Page 18 of 19

KPM.GTeam
• The KPMG team has significant experience in assisting fortune 50
co.mpanies in the migration of Section 936 cornpnny assets to new
defenal structures i11 several industries including 1.ech11ology,
pharrnacet1ticals, and const1rner products.
• Brett Wemer and (jreg George will lead the locnl tcnrn and co-ordinate
all aspects of the project.

• National resources committed to this prqject include SteYe Lainoff. a
principal in KPl\1G-'s Natkmal Tax pntetice. as well as Ron Haffey and
Ed Kc11nedy., pnncipals in KPl\1G's Ne,v York offic:e with extcnsi, c
expcricnc" in migrations of this kind.
• The P1.1erto Rican team will be led by Rolando Lopez, a partner in the
San Juan ofikc who has previously advised scYcral US. clients on
migrations of this type nmt success.folly negotiated signlficant ta,;

holi<la_'is for U.S. companiC's \\ith lhC' Pucr!o Rican govcrnmenL

I.?

17

18

CONFIDENTIAL

KPMG MS IRS 0022052

 Case 2:15-cv-00102-RSM Document 146-8 Filed 10/12/16 Page 19 of 19

,\lnfr;,\~'rr.Jff has k'l~,\:((f e1pre:1s \1·,;,1ttert t.rnO-:rfir>::atir:,11 peoniftrl('< J./1,:,-,ro,'ff,!Ti r~·ind eac/.i
,?ftt.~· <!m_ploJ ·ees., J't~_·pn:,1·<~i-!t.:N;ve.s, ,.:;,r (,ther og,1 1Us) w .:l,:,w-/0.~'1..~ t.::, <U,'.J · and ol/ pc,,·sou.·,,
:1:'ilhm1t .ifnnt...:1t10:11 of'
A'ind. tlJe stta'u.:ft.rre., ..-u1d tox n.,t1ects (/ tlut Sh",'i'c.'/n1·es, aurl
all 11u.:1te1 i,)l,.;; ,·,f (Off k"11•td {n~.·;'l,!u.:{1ug 01,·J,1nwn.\ or <'.)/'h·i;,1· l,·).Y tina!y_r.,•,~'s) i)ro1·1iletl lo
Jl.rc1r)sofi1 nduf1.:d fo s:n'h sn·aco11·.~•s ond f1).i" ..:1~});:cts.

18

19

CONFIDENTIAL

KPMG MS IRS 0022053