This global automobile manufacturer’s North American operations include automotive styling, engineering, consumer and corporate financing, sales and marketing, distribution, and manufacturing for the United States, Canada, and Mexico. Their manufacturing capacity in North America now exceeds 1,000,000 vehicles a year. Due to their financing of vehicles, they are one of the largest issuers of asset backed securities in the US.
This company had experienced a significant amount of tax staff turnover due to company headquarters moving. Management saw the need to improve tax operations and agreed to conduct a “look back” review to recover any taxes available to be claimed. The company elected to bring in PWC to review their returns. PWC found a seven-figure refund in California due to a simple oversight by the preparer. Understanding Ashland’s depth of experience and previous success following a Big Four review, the automotive company felt that it might be worthwhile to have a specialized team conduct a more focused review. They chose to retain Ashland to see if we could identify any additional refunds.
Ashland brought a five-person Single State Specialist team to the global automotive manufacturer’s offices to conduct the on-site review. After an introductory meeting, the company provided a conference room where the Ashland team could work for the remainder of the week. Ashland’s consultants combed through the tax returns, apportionment schedules, workpapers, and audit schedules during the next four days. At the end of each day, we held a short meeting to clarify points or get answers to any questions the team members may have had. At the end of the fourth day, the Ashland team met with the company and presented their issues in a Report of Findings, in which we defined each issue and disclosed the tax benefit.
The difference is the depth of experience. If I have a senior manager from the Big Four coming to see me, I know that person is probably 6 or 7 years out of school. They may have great experience and might be the brightest person in the world, but they're not going to have 30 years experience auditing fortune 50 companies.”
In California, despite the fact that PWC had identified a seven-figure refund amount, Ashland was able to identify an additional $10,000,000 of favorable adjustments related to apportionment issues. Ashland’s Single State Specialist, a former FTB major case Audit Supervisor, found these issues even though they were not easily identifiable. Ashland presented the issue to the company, obtained the data, and prepared the schedules, all of which was given a final blessing by the automotive manufacturer. They were then included in the RAR adjustments and, after review by a California auditor, they were approved. Refund checks were issued shortly thereafter.
The company’s tax case was open back to 2006 in New York State and New York City due to an audit. Ashland’s Single State Specialist for New York identified several issues available to be claimed. Ashland prepared refund requests of approximately $1,600,000 that were given to the auditors. These were approved and the audit assessments in both taxing jurisdictions were reduced by the amount.
They're very good. They come in for a week, and after that we'll sit down. They go through all their ideas, they'll be all written up and printed and we'll sit down around the table and talk about them. We will go back and evaluate if we really want to pursue it or not. A lot of times we do and sometimes we don't.
A property factor issue was identified in Indiana that resulted in a refund of approximately $1,000,000 for the three years open. This was filed as a refund request and approved by the state. The company received refund checks for this adjustment.
For Illinois, Ashland’s former state auditors identified an apportionment issue worth approximately $1,800,000. A refund request was filed and upon audit the auditor disagreed with the issue. The company feels strongly about the issue and has protested with the state of Illinois. We are currently awaiting a decision.