James Hardie Settles With IRS Over Netherlands Tax Treaty Dispute

by Glen Shapiro, LawAndTax-News.com, New York

15 April 2009

James Hardie, the global building materials company, has announced that the Appeals Division of the US Internal Revenue Service (IRS) has signed a settlement agreement with the company’s subsidiaries relating to arrangements made under the tax treaty between the United States and the Netherlands.

According to a company statement issued on April 15, the IRS "concedes the government’s position in full with regard to its assertion in the Notice of Proposed Adjustment, received by the company on June 23, 2008, that the company did not qualify for benefits under the United States-Netherlands Tax Treaty for the calendar years 2006 and 2007."

The IRS has concluded that, for those years, the company is entitled to reduced withholding tax rates under the Treaty for certain intra-group payments from the United States to The Netherlands.

The company previously announced last June that the IRS’s proposed tax assessment for the years 2006 and 2007 consisted of primary tax of USD37m, penalties of approximately USD9m and estimated interest of USD4m. The IRS has conceded that these amounts relating to the years 2006 and 2007 are not owed by the company.

The company further stated that: "The matter has been resolved with the IRS Appeals Division, and under the normal IRS procedures no further steps will be taken with respect to the 2006 and 2007 years. This agreement applies only to the 2006 and 2007 years and will not affect or limit the IRS’s ability to challenge the company’s qualification for benefits in later years."

This result is not expected to have any impact on the company's FY2009 or FY2010 results as the company has not set aside any amount in relation to these proceedings under FIN48, the relevant US GAAP standard on accounting for uncertain tax positions.

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