tax technology systems. 2 © 2011 halliburton. all rights reserved. the need for change inadequate...

Tax Technology Systems

2 © 2011 HALLIBURTON. ALL RIGHTS RESERVED.

The Need For Change

Inadequate for basic tax functions: – Provision system (TIS) is unsupported– Compliance system not fully implemented– Provision/Compliance reporting systems are not integrated – Poor functionality (FIN48, FIN18, TBBS do not exist in current systems)

Do not support Tax Departments Objectives: – More tax resources allocated to tax planning– Single tax system platform supporting:

• Global provision and U.S. compliance integration• Tax planning and tax controversy processes• Visibility of global tax attributes to the home office

– Possibility of foreign tax compliance in a future state– Potential for integration of transactional taxes

• VAT, Sales & Use, Property

– Configuration to allow finance ERP systems (SAP, HFM, and Hyperion Planning) to better support tax

Current Systems …


Tax Accounting:

Foreign Provision

Fin48/UTP

E&P Pools

Domestic Deferred

Domestic Provision

Tax Planning

Compliance:

Dom., Int’l, State

VAT

Sales & Use

Property

Transfer Pricing

Excise

Audit/Controversy

Tax Systems Vision – Single Platform

2011 2012 2013

TIS DI

Access

BNA BNA BNA

CorpTax

OneSource

Implementation

Vertex Vertex Vertex

Access Access Access

TDW TDW TDW

TalismanTalisman

OneSource

Implementation

CorpTax

OneSource

(Capability)


Improve transparency, quality and speed by reforming processes and integrating technology platforms

► Progress to improve income tax reporting will be slowed since current technology cannot support desired improvement

► Issues will be compounded with continued growth

► Continued risk in tax reporting errors, missed deduction, penalties and interest

► Challenged in the ability to manage and communicate tax position in real time

► Quality suffers due to sub-optimal use of people, process and technology

► On-going retention issues and ineffective support

► Key Issues and Challenges

► Data and technology gaps exist at each layer of tax calculations which require manual workarounds and take time away from value added work

► Manual processes are required to interface data across reporting lines and within reporting functions creating challenges to high quality review

► Provision and compliance integration is difficult creating rework and risk of error

► Heavy reliance on excel worksheets to support tax calculations results in increase risk of errors, duplication of effort

► Significant manual workarounds result in inability to report and communicate real time results

► Teams are looking at data a different levels and in different time periods creating increased risk of error

► Current manual processes require brute force efforts on a recurring quarterly basis

► High cost of developing and maintaining proprietary tools

Current situation Potential risks of inaction or delayed action

► Reduced reconciliations through substantial improvement in integration

► Cost savings through reductions in manual processes

► Significant reduction in income tax reporting cycle time requirements

► Higher visibility into tax processes and results at each “layer” increasing awareness of issues and related impacts

► Increased accuracy and greater visibility of information through automation

► Reduction in low value added manual activities will improve retention

► Software maintenance costs decrease by changing to 3rd party “off the shelf” tools

Key benefits provided by defined program


Technology & ProcessDesired Outcomes & Benefits

Strategy Performance

► Provide a true tax provision calc at lowest common level (legal entity and business unit)

► Complete calculation within hours of data availability

► Re-use data in cumulative-build PEER process (integrated Provisions, Estimates, Extensions and Returns)

► Storage of data and work product for future audit

► Lower costs

► Shorten cycle times for recovering reports/data

► Automate book/tax differences

► Automate tax planning modeling

► Redirect tax resources to planning and analysis

► Collaboration with service providers and internally

► Ability to access and maintain data


Data QualityDesired Outcomes & Benefits

Strategy Performance

► Create a centralized source for data that supports both current tax planning and reporting as well as future audit defense

► Manage data as a core asset of tax operations

► Create processes for tax and accounting functions to establish data standards

► Maintain tight control over material tax items/related accounts that impact tax

► Increase accuracy, and reduce reconciliations

► Single point for storage/retrieval of data

► Ability to manage audit risks

► Increase tax savings through planning

► Transparency of data—clear audit trail

► Automated system controls

► Improve validation at earlier points

► Standardize rules and activities having tax impact

► Accountability inside and outside Tax for quality of data


Software Evaluation Process Conducted including all tax disciplines Involved evaluation of two leading vendors

CorpTax OneSource

CompanyMLM Information Services, LLC.

(Private Equity Owned)

Thomson ReutersNYSE:TRI$13B RevenuePresence in 100 countries

Strategy • Built on Compliance Core • Single Database

• Built by acquiring Best–In-Class Tax Systems

• Integrate multiple platforms

Software Strengths

• Compliance

• Provision• Data Management (supports

Process Improvement)• Foreign Support

OneSource Is A Better Fit For Halliburton


How OneSource Supports Tax Direction Sustained Process Improvements:

– Flexible data feeds & adjustment automation enable working with F&A to improve upstream data feeds

– Workflow allows us to build standard processes into software, thereby mitigating risk of manual manipulation

– Improved functionality means fewer manual workarounds and reformatting of reports to meet custom needs

– Single platform enables staff to move between provision & compliance

Improved Data Management:– Enables automation– More flexible data feeds– Higher level of detail available– Less manual process maintenance

Enhanced Reporting Capability:– Uncertain Tax Position Calculations (FIN 48)– Forecasting Functionality (FIN18)– Global Provision – visibility around the world, without manual effort

Allows Tax To Focus On Higher Value-Added Activities


Implementation: Ernst & Young First-hand knowledge of Halliburton’s business and systems

– Project Leads are familiar with data warehouse/ODS, SAP, Hyperion, TIS, Talisman and other unique Halliburton tools understanding how each must integrate across tax (gaining efficiencies through minimal time spent “getting up to speed”)

– They have worked with Halliburton tax in functions such as provision, compliance, transfer pricing, apportionment and other areas

Global Tax Performance Advisory Team – EY’s Tax Performance Advisory (TPA) team is organized globally and focuses on

people, process and technology at large corporate tax departments. • Full time, dedicated TPA resources number above 60 in the U.S.• Approximately 20 in Europe/Middle East/India/Africa (EMEIA) and • Approximately 10 in Asia/Pacific • TPA services in Brazil, Mexico and a Latin America Bus. Center in Miami

Providing objective advice – EY provides objectivity to point out the vision, process and people changes that

must occur to reach project goals. Software vendors rarely have the experience outside their tools to provide this type of objective advice.


Implementation: Ernst & Young (cont….) Tax accounting technical experience

– EY has consulted with the CAO and CFO of Halliburton on technical accounting issues and brings both the accounting technical, in addition to the implementation experience needed.

Considering the full picture– EY has extensive experience in teaming with all groups that are critical to these projects to

obtain the right input and insights from multiple groups within Halliburton (Accounting, Tax, IT, etc) and other groups (external auditor).

Working with the external auditor – EY standard methodology includes external auditor at key milestones evaluating changes to

the controls, testing plan and approach to provision calculations.

Partnering with software developer– Ernst & Young is formalizing an agreement with ThomsonReuters to achieve global

implementer status, meaning teams are trained consistently in the same exacting standards ThomsonReuters requires, not just domestically, but globally.

– Ernst & Young is the only service firm with one practice (TPA) that is organized globally. – Ernst & Young will team with ThomsonReuters, as appropriate, to provide best-practice

solutions .


Tax Systems Team – Internal Resourcing

Mark Sumlin – Project Lead Daniel Garcia – Project Manager Gary Sella – Process Manager Kevin Shea – Data Manager Sara Sykes – Domestic Provision/Consolidation Darrell Simmons – Foreign Provision Randy Miller – Compliance Lead Randy Phillips – Federal Compliance Noman Mogul – International Compliance Lyle Maddox – State Compliance


Next Steps – Obtain Internal Approvals

Subsequent to approvals…– Coordinate with stakeholders:

• Procurement & Legal• Information Technology• Internal Audit• Finance and Accounting

Define Configuration:• Conduct configuration workshop with Ernst & Young

and ThomsonReuters• Finalize detailed workplan and roles

Acquire Software/Services• Begin Implementation

Data Management Group

June 14, 2011


Team Members Kevin Shea Randy Phillips Benjamin Huang Elaine Tang Daniel Garcia Jim Anderson Gary Sella Sita Chowdhury Nancy Vu Stacy Hill Nekeya Evans Sharon Streiffert Noman Mogul Steve Pipkin


How We Serve / Who We Serve

Combine Technology and Function SMEs as a group Pool the resource and knowledge, Identify data issues and provide

efficient solutions Assisting in areas such as:

– Tax Accounting• Streamline data process and support reporting obligations

– Tax Planning• Provide financial reporting assistance for IP structuring

– Tax Compliance for supporting regulatory obligation• Assist to optimize data, system, and processes

– Tax Controversy for audit support substantiation• Reports to collect audit defense R&D

– Tax System Implementation• Increase automation on data sources and processes• Assist system Integration


Automate FIT Data Process

Business Owner: Darrell Simmons Project Lead: Nancy Vu

Purpose: To enhance and increase process efficiency for foreign provision tool - FIT

Area/Item for Improvement Time Est

Create dual FIT templates functionality Done

Import SAP Book balances Done

Import TBBS adjustments 10/31/11


Research & Development Process

Business Owner: Janet Wilson Project Lead: Nancy Vu

Purpose: To provide documentation, organization, and transparency for R&D

Area/Item for Improvement Time Est

Streamline collection of raw project data TBD

Organize supporting documents TBD

Create progress checklist TBD


Financial Reports for IP Analysis

Business Owner: Mark Sumlin Project Lead: Benjamin Huang

Purpose: Provide financial reports to support IP analysis project

Area/Item for Improvement TimeEst

Reconciled Mgnt book (PSL) w/ Legal book Done

US vs. Foreign by Cocode by PSL TBD

Reconciled reports to support IP model TBD

Direct Sale by PSL and Geography TBD

Tax Forecast by Cocode by PSL TBD


Withholding Tax Validation

Business Owner: Steve Pipkin Project Lead: Benjamin Huang

Purpose: To increase foreign tax credit accuracy from W/H tax receipts


Foreign Tax Accrual report Done

Prior Year True-up Comparison Done

Analysis of Withholding Tax Payments Done

Analysis of Changes of Prior Year True-ups 11/30/11

Analysis of Changes in Assigned items 11/30/11

Analysis of Changes in Unassigned items

11/30/11


E & P Process

Business Owner: Steve Pipkin Project Lead: Elaine Tang

Purpose: To centralize and streamline E & P study and adjustment process


Centralize and Streamline E&P process 6/30/11

Provide E&P simulation (what-if) function 7/31/11

Develop consolidated E&P analysis reports 7/31/11

Automate annual average exchange rate 8/31/11

Data automation with Compliance app 9/30/11


Global Operation Documents Management

Business Owner: Mark Purnell/Glenn Little Project Lead: Sharon Streiffert

Purpose: Provide critical documents to support F&A & Tax global operations


Inter-Company agreements 6/30/11

Transfer Pricing Global and Country Study 6/30/11

Expatriate Tax documents 6/30/11

Regional Tax Country documents 6/30/11


Business Objects Reports

Business Owner: Randy Miller Project Lead: Daniel Garcia

Purpose: Upgrade Business Objects Platform & Migrate Current Inventory of Reports Into the New Environment


Upgrade Business Objects to XI 3.1 12/31/11

Analyze & Identify Opportunities For Efficiency Gains in Universes, Schemas, Queries & Reports.

03/31/12


Indirect Tax Process & Technology

Business Owner: Kenny McCorquodale Project Lead: Daniel Garcia

Purpose: Initiate and successfully complete our short and mid term Sales, Use, Excise & Property Tax process & technology opportunities


New Excise Tax Reporting Database 12/31/11

Identify Existing SUT Technology Limitations 12/31/11

Upgrade Vertex Returns Database (SQL) 12/31/11

Explore Property Tax Compliance Packages 12/31/12

Explore SUT Automation Upgrades 12/31/12

Explore VAT Automation Upgrades 12/31/12


Future Data Improvement Focus Areas

Controversy modules Section 199 Tax Forecast Pool SME Expertise Reduced Excel-based manual process Tax Planning Tracking module Entity or Stock basis

Tax Accounting Workgroup

Process Improvement Initiative

June 14, 2011


Tax Accounting Workgroup

Team Members– Gary Sella– Darrell Simmons– Nancy Vu– Rose McNulty-Hurst– Lyle Maddox– Helen Griffiths– Dora Man– Eirik Kindingstad– Mark Sumlin– Randy Miller


Finance Organization Vision and Values

Core Concept• Insight – using our financial expertise to provide Halliburton with the

intelligence and flexibility to respond to any opportunity• Quality, Efficiency and Control – consistent delivery of reliable

and timely financial information, analysis and properly executed transactions utilizing best-in-class, streamlined processes with a commitment to a strong control environment

• Employee Development and Recognition - retaining and attracting the highest-quality finance professionals


Finance Performance Objectives

2010 & 2011 performance objectives relative to Quality, Efficiency and Control. – Drive Report Standardization – Ensure “one version of the truth” utilizing

Hyperion management reporting and implementing a standard project accounting application

– Promote Efficiencies – Leverage our applications to reduce manual processing and our business model to maximize output & identify areas for automation and drive reduction in manual processing


Finance Performance Objectives

2011 performance objectives relative to Insight. – Forecast Accuracy – Monitor and help drive forecast accuracy for both

revenue, cost and contribution margins– System and Process Improvements- Plan and implement within budget

and timing constraints:• Streamline tax systems


Team Objectives

Promote Efficiencies & Control– Automate routine, recurring manual processes– Decrease time and data manipulation required to compute the global tax

provision– Enhance ability to incorporate late accounting entries into the tax

provision processes– Expand time devoted to application of internal controls to the reporting

process– Utilize standardized processes to insure appropriate application of

governing technical guidance Forecast Accuracy

– Increase capability to accurately forecast and monitor effective tax rates globally

Employee Development and Recognition– Empower personnel to engage in more value added planning activities


Obstacles

Systems that are not integrated Manual processes that are time consuming Compressed cycle time for reporting requirements Lack of analytical processes integrated into the calculations Multiple data sources that require reconciliation Inability to view global account reconciliations Timeliness of necessary information from the field Sufficiency and quality of data required


Targeted Areas of Focus

TIS is outdated (unsupported) and fails to support provision requirements– Cannot generate balance sheet account adjustments– Cannot generate a FIN18 or FIN48 reporting pack

Provision data base (Access) used to compensate for TIS shortfalls gives rise to duplicate maintenance– No OCI or Stock Comp capability

Systems do not fully support SEC auditor requirements Major processes completed manually with little automation Existing systems lack flexibility to integrate with ERP systems

– TIS only accepts general ledger balances Poor visibility into near and long-term future

– Talisman (month lag) cannot generate the information needed for forecasting

Process for continuous training required Alignment of tax with the finance organization (data not aligned)


Upstream Solutions

Adoption of HFM as single source of balances for tax provision and compliance purposes – Enhance the Return-to-Accrual process– Automate reconciliations of Pre-tax book income

• Provision IBT comes from HFM• Compliance IBT comes from SAP

Increase timeliness of data availability– The Data Warehouse cannot populate the information fast enough to be

useful to tax Integration of Hyperion Planning data directly into provision processes on a

real-time basis


Systems Solutions

Obtain system tools compliant with IT and Internal Audit requirements Use single system platform to house and support global tax provision

activities that can be leveraged by compliance, controversy, and planning activities– Thompson Reuters OneSource

Provide for increased system configuration flexibility to capitalize on sub-balance data available from ERP systems

• Cost Center• Purchase Order• Document Type, etc…

Provide for increased system reporting flexibility to accommodate cross functional review without manual generation of reports

• FIN 18• FIN 48• Tax Basis Balance Sheet


Automation of Manual Processes

Support analytical processes with SAP exception-based reports Use new systems to reduce number of manually prepared PBC schedules Establish adjustment rules based on sub-balance attributes to

accommodate automation of mixed use accounts: – Single reserve accounts containing temporary and permanent

transactions (mixed-use accounts) – Contra-balances embedded within asset/liability accounts (foreign

currency valuation) Use systems resources to support local country adjustments from GAAP

balances to statutory balances and automate local country tax adjustments


People and Training

Assignment of support responsibility to Tracy Howell to assist F&A field personnel and RTM’s

Completion and rollout of iLearn courses followed by continuous update Tighter integration with accounting functions to initiate knowledge sharing in

areas such as:– Joint venture accounting– Benefits accounting– Fixed asset accounting, etc…

Increase focus on GAAP (ASC 740) technical training for personnel holding tax provision roles


Reporting Quality Assurance

Enhance scope of analytical reviews through efficiencies gained in preparation time at closing

Optimize ETR continuous monitoring Resolve provision impact of tax issues as they arise, minimizing the work

effort at quarter end Formalize continuous connectivity to finance so as to be aware of real time

issues impacting tax Incorporate use of provision reporting checklists to ensure appropriate inter-

and intra-period classification of balances


Priorities and Timeline

Implement upstream data solutions in line with needs of system solution (beginning July, 2011 and ending June, 2012)

Support provision system implementation activities (beginning July, 2011 and ending June, 2012)

Address automation of manual processes (beginning July, 2011 through December, 2012)

Initiate people and training objectives (beginning July, 2011 and ongoing thereafter)

Undertake reporting quality assurance measures commensurate with supporting systems/processes availability (beginning July, 2011 and ongoing thereafter)

COMPLIANCE TEAM

June 14, 2011


Team Members

Lisa Brown Annie Liou Kenny McCorquodale Noman Mogul Linda Perritt Randy Phillips Pam Smith Mike Thacker Jim Weber Tanya Weisinger Rob Wilson


Why Review Compliance Processes?

Reduce Inefficiencies & Redundancies

Drive More Accurate Estimates

Accelerate Close-Outs

Accelerate Return Filing Dates

Maximize Use of Technology

Maximize Use of Skill Sets - Best Use of Personnel


Overall Objective

Optimize Workflows, Resources and Technology


Areas Initially Covered

US Domestic (40 Form 1120’s, 1 Consolidated Return)

US Partnership Reporting (2 1065’s, 12 8865’s)

US-International (155 Form 5471’s, 8858’s, 5713)

US-State / Local Income (432 – Returns, Est. Pmts, Extensions)

Indirect Tax (Sales / Use & VAT) – (3,637 US Filings Annually)


Overview – What Have We Done To-Date

Collaborated w/ Tax Team Members At Large To:

– Discuss Issues / Opportunities– Evaluate Corp Tax vs. One Source– Regroup – Address Indirect Tax


Data / Processes / Technology

Common Theme From Discussions:

– Data Sources – Fragmented Processes / Systems– Manual Effort


Domestic Income Tax Issues / Opportunities

Forms Automation International Inclusions / Data

– Sub F Income– Section 78 Gross Up– Foreign Tax Credit– Foreign Source Income

Topside Entries Manual Tax Adjustment (process) Automation

– Hedging Contracts– Section 162(m) Limitations– Aircraft Usage– Entertainment Facilities– Dual Consolidated Losses– Section 199– Hybrid Interest and FX


Domestic Income Tax Issues / Opportunities - Continued

Manual Tax Adjustment (data) Automation– Effect of Account Balance Transfers on Rules– Effect of Accounts w/ Mixed Use Timing Difference on Rules– Effect of Foreign Exchange Reval / Re-measure on Rules

Split Companies Estimate Automation in Compliance Software Tax Depreciation

– Bonus Depreciation Automation– New Acquisition Tax Books Population– Annualized Tax Depreciation in Period Data

Disclosure Automation


US International Issues / Opportunities

Further Automate Forms 1118, 5471, 8858 and 5713

- Set Up Auto Rules For E&P Adjustments

- Automate Foreign Sourcing (Tech Fees, Leasing,

Export Sales, etc.)

- Streamline 861 Processes (Interest

Expense Allocation, G&A, Stewardship, etc.)

- Automate Form 5471, Sch M Create “What-If” Planning Scenarios Drive Automated Calculations For Estimates Create Repository for E&P Studies Enhance Communication in Section 956 Process (Monitor

Debt Settlement Timeframe)


US State Issues / Opportunities

Maximize utilization of Compliance Software

Automate Transfer of Data Between Compliance Software and Excel

Calculate State Depreciation


US Partnership Rptg. Issues / Opportunities

Consider the Effect of “Process Changes” for Partnership Rptg.– Effect of Auto Adjustment Rules - Partnership Capital Account– Mapping for 1120 may vary from Mapping for 1065 / 8865

Create Separate “Capital Accounts” for Partnership Rptg.– Partnership Capital Account– Contributions– Distributions

Reconciliation of Inter-company Loans– Currently Netted– Need True Accounting of Total Liabilities

Mapping Opportunities to Achieve Single Source of GL Data. – Automate Process – Foreign Source Income / Deductions– Automate Process – Intercompany transactions


Indirect Tax Issues / Opportunities

Reduce the Number of US Indirect Returns by 500 – Q3 Explore Legal Entity Impact (further reductions – returns and processes) –

Q4 Enhance Property Tax / Excise Tax Reporting

– New Excise Tax Reporting Database - Est. Completion - Q4– Standardize Property Tax Procedures - Est. Completion - Q4

Identify VAT Compliance Issues - Est. Completion - Q4– SAP Reporting Issues– Manual Processes– Documentation Issues

Identify Existing SUT Technology Limitations – Q4 Upgrade Vertex Returns (SQL) – Q4


In the Foreseeable Future…..

Manage Legacy Systems / Processes (i.e., TIS / Corp Tax, etc.)

Continue to Identify / Document / Address Opportunities– Outside the Technology Platform – Within the Technology Platform– With F&A

Develop Power Users within Each Compliance Area (Business Objects, Tax Data Warehouse, etc.)

Commence Further Discovery – Indirect Tax (including VAT)– Explore Property Tax Compliance Packages – 2012– Explore SUT Automation Upgrades - 2012– Explore VAT Automation Upgrades – 2012

FOREIGN TAX CREDIT DOCUMENTATION

Payments

Third Party Withholding

Interco. Withholding

Tax Returns


TEAM MEMBERS

Sheila Brooks Mitch Brown Helen Griffiths Tracy Howell Linda Landry Dora Man Steve Pipkin Janet Rudnicki Darrell Simmons Sara Sykes Nancy Vu Trina Yeh


ISSUE

FTC’s (Foreign Tax Credits) per the Federal Form 1118– 2007 $263M – 2008 $232M – 2009 $220M– 2010 $240M (Proposed)

10 Year Statute of Limitation Penalty under Section 6689 FIN 48


OBJECTIVE:

Verify that Current Business Policies and Practices Cover the Documentation / Substantiation Process

Review the FTC Documentation / Substantiation Process Identify Gaps in the Process Develop Process to Efficiently Account for FTC’s on a

Monthly / Quarterly Basis Develop Processes / Procedures to Efficiently Account

for and Substantiate Foreign Tax Receipts in a Timely Manner


FOREIGN TAX CREDIT DOCUMENTATION

Corporate Policy and Business Practices Tax Accounting Tax Compliance Tax Audit Talisman Training


Corporate Policy and Business Practices

4-44041 Copies of Tax Receipts and Tax Returns

(Updated 10/28/2010)

4-44131 Non-U.S. Tax Filings – Corporate Income Tax

4-44150 Accounting for Withholding Tax on Intercompany Transactions

4-44136 Tax Audits by Non-U.S. Tax Authorities

4-44133 Approval of Non-U.S. Corporate Income Tax Payments

4-44129 Non-U.S. Income Tax Accruals


TAX ACCOUNTING

Foreign Tax Credit Life Cycle – Provision Accrual

• Current• FIN 48

– Return to Accrual True up– Amended Returns– Audit Adjustments– Carry Back to Prior Years– Carry Forward Balance


Tax Compliance

Foreign Tax Credit per Federal Form 1118– 901 Direct Credit– 902 Indirect Credit

905 (c) Redetermination / Foreign Tax Adjustments that affect FTC’s

• Amended Return Required for Increases in US Tax Liability due to:

– Decrease in Foreign Tax Liability– Accrued Taxes Unpaid after Two Years

• Penalty (Section 6689)– 5% of the Tax Deficiency for Failure to Notify– Maximum Penalty 25%


IRS Tax Audit

Foreign Tax Credit Substantiation– Primary Evidence

• Translated Tax Returns• Translated Receipts for Each Tax Payment• Translated Tax Assessments

– Secondary Evidence• District Director may Accept

– Copies of Financial Instruments with evidence that tax was paid on behalf of the taxpayer

– Excerpts from taxpayers books and records or foreign law

– Ten Year Window for Substantiation


TALISMAN

TRR – Tax Return Reconciliation– Original Return– Amended Return– Audit Assessments

Withholding Tax Module– Third Party (Customer W/H Tax remains in A/R until

Receipts are Received)– Intercompany

• Domestic to Foreign• Foreign to Foreign

RTA / OPA Modules– (Return to Accrual / Out of Period Adjustments)


Conclusion

Talisman Modules are Sufficient to Capture Foreign Tax Receipts / Documents

Additional Process Required to Capture Data for Prior Year Tax Expenses - Monthly / Quarterly:

• Adjust Current Year Tax Return• Eliminates Fire Drill Request• Support Amended Return Filing • Support IDR Requests• Supports the Planning Process

Review and Amend Record Retention Schedule to Confirm Tax Receipts are Addressed

Develop Process to Release 3rd Party WHT from A/R


CONCLUSION CONT’D

Additional Training Required– Develop an I Learn Course Specifically Related to the

Foreign Tax Credit Substantiation Process • Reviewed and Updated Annually by:

– Tax Accounting– Tax Compliance

• Annual Certification Required – Finance & Administration– Tax Accounting and Compliance

TEAM CONTROVERSY

June 14, 2011


Team Members

Janet Rudnicki Stephen Heeler Sara Sykes Norma Allen Dinorah Gonzalez Nikki McClanahan Glenn Little Tracy Howell


Why Coordinate Global Tax Controversy

Mitigate worldwide tax liability (lower ETR) Controversy should not be the tail-end of the process Financial reporting requirements ASC 740/ASC 450;

aka (FIN 48/FAS 5) Maximize foreign tax credit utilization by exhausting all

remedies Develop global strategies (proactive vs reactive) Tax risk management is an integral part of enterprise risk

management Identified best practices (80% of large corporations have a

coordinated global controversy process) Timely feedback for necessary changes-improve visibility


Brainstorming from 3/11

How might we improve our tax controversy management Front end involvement in planning Team coordination of global risk and controversy Enhance existing tracker tools Develop strategic approach to resolution


Objective of coordinated controversy

Manage the identification, tracking, communication and coordination of global controversy and risk mitigation with respect to all areas of taxation, including but not limited to:

U. S. Federal Income U.S. State and Local Income International Income Tax Transaction Tax (i.e. sales & use tax, value added tax,

property tax) Payroll Taxes Other taxes for which the company is ultimately liable or

responsible


Short Term Objectives - 2011

Enhance working relationships with planning team to properly document strategic initiatives

Begin to mitigate Fin 48 issues arising from lack of documentation

Identify jurisdictions where deduction is threatened because of lack of documentation

Develop database of historic intercompany issues and their resolution – reduce duplication of effort

Identify and form ad-hoc controversy team Develop uniform process for communicating potential

exposures to SVP-Tax and F&A & Advisors Develop strategy for audit, litigation, competent authority

decision or alternative resolution process and statues


Environmental Challenges

Globalization/information sharing Increase in transparency (UTP/FIN 48 disclosures) Resource allocation Government deficits Aggressive enforcement activity Emerging audit techniques New penalty regimes Pressure to reduce ETR vs. historical risk adversion


Long Term Objectives – Post 2011

Define, develop and implement issue tracker tools to the specifications of global controversy requirements & F&A that feeds to the FIN 48/FAS 5 tool

Develop and implement uniform Information Document Request tools

Develop corporate practice for coordination of global controversy process

Partner with internal audit to ensure integrity of global tax controversy process

Partner with internal audit to ensure planning strategies are implemented, executed, and maintained in accordance with the plan

Implement a rotation/training process to develop expertise


Mitigate FIN 48 Documentation Issues

For example, material exposures for E. Hemisphere at 12/31/2010 were $USD 82M

Approximately 50% relate to documentation issues including deficient or insufficient support

Arbitrary behavior of tax authority cannot be ruled out Direct correlation with jurisdictions favoring substance over

form such as Eurasia, Middle East, Africa, Asia Pac, Indonesia.

There are similar issues in Western Hemisphere (i.e. Canada).


FIN 48 Issues - Continued

Specific issues include head office allocations, regional cross border charges, intercompany expenses, verification of reduced treaty rates on WHT, and business expense generally.

Risks increase with acquisitions and internal restructurings Recommend analysis of each FIN 48 UTP to identify the

documentation issues and required mitigation– Link to internal audit and existing controls– Consider short term assignment – Educate system users to integrate SAP to maximum

benefit Investigate FAS 5 and VAT issues


Expand Current FIN 48/FAS 5 Talisman Functionality

1. Add Tax Controversy “Sandbox” at front-end 2. Issue progresses to UTP under FIN 48 or

contingency under FAS 5 or does not mature as a liability

3. Issue is potentially queried by taxing authorities and progresses to the IDR Tracking Tool

4. Issue progresses to the Global Tax Audit Issue/Experience Tool upon audit resolution

Refer to Controversy Process Flow on slide 18


Personnel Structure for Global Controversy Team


Uniform IDR Tracker Tool – Long term objective


Uniform IDR Tracker Tool - Continued

Creates visibility of document requests made by auditors and documentation subsequently provided– Identifies source documents previously compiled by others

thereby eliminating duplicative efforts and allows for a uniform response to same questions year after year or from auditors in different jurisdictions for the same time period

– Forces a level of accountability on us as audit coordinators to keep the audit moving

– Establishes an argument for potential penalty or interest waivers or other favorable negotiations when delay is on the jurisdiction


Uniform IDR Tracker Tool - Continued

Establishes a historical log of what documentation was requested and provided in prior audits– Beneficial in preparing for newly generated audits– Indirectly serves as a road map or training tool for new

staff assigned to a specific jurisdiction’s next audit cycle Creates easy access to documentation submitted through

document linking Creates a searchable database where information can be

easily filtered by type of request, entity, date, etc Enables management to move from one IDR tracker tool to

another among the various tax types with ease due to the uniform format


Historical Database of Issues and Resolutions – Short Term Objective

Reduces duplication of effort Supports FIn 48 position Highlights need for review of issues in other jurisdictions Identifies potential controversies in other jurisdictions Provides for consistent worldwide position Helps in decision process of resolution in other jurisdictions Must include audit theories/positions on the issue Did the final outcome resolve the issue or just settle the

current audit Actions taken after the resolution


FAS 5/FIN 48 (F&A) Status Reporting Query (Country/

Region Updating)

IDR Tax Tracking Functionality

(International, U.S., State (U.S), Sales & Use Tax)

Global Tax Audit Issue/Experience Database

(Issues by jurisdiction, period, tax auth position, response/strategy, ultimate resolution)

Planning Initiative

June 14, 2011


Planning InitiativeTeam Members:Mark Purnell Steve PipkinSteve AxlerJoe HobsonShirley LiTrina YehFaye BrownSimone MalbyYannis SteeleReginald Butler


Introduction

We looked at the tax planning lifecycle, from idea generation, through design & implementation to maintenance and audit controversy

Identified the following areas as key opportunities for improvement:– Develop internal expertise/resource– Integrate Tax within the broader organization– Data availability and management– Incentivizing for Tax– Project Management


Planning Initiative No. 1

Identify & Develop Internal Resources


Identify & Develop Dedicated Internal Planning Resources

No need for a separate & independent planning department Can create silos inside tax department Halliburton is not of the size to merit a separate tax

planning group Current RTM structure works very well

Based on discussions with PwC, EY & other companies Good planning comes by fostering communication

with the different tax department groupsCreate responsibility of certain individuals to

promote active communication


Identify & Develop Dedicated Internal Planning Resources – Cont’d

Take Away: Should be a structure in place to coordinate and track planning ideas with oversight by one or two individuals. This is done to make sure that any RTM plans do not cause adverse US tax impact and vice versa

Take Away: Regroup former tax planning committee consisting of US and international members



Integrate with F&A / Operations


Should Tax Integrate Better with Other Departments & How?

Perception is that we operate in a silo. Too often we are brought in as an after thought Need to get “front & Centre” in peoples minds to involve tax asap

F&AHemisphere/Director Level – regular meetings being held

and will continueRTM level – regular meetings to be scheduled between

RTM’s and respective controllersHome office – consider periodic meetings with division and

PSL controllersNote – physical proximity to F&A only considered important

at the RTM level


Should Tax Integrate Better with Other Departments & How? - Cont’d

OperationsRTM should attend Region VP strategy/

planning/periodic team meetingsTax should attend PSL/Division strategy meetingsProbert to meet Andolino annually to discuss strategy

and planso Tax needs to bring value to these meetings and not

be “passengers”Consider appointing each PSL a “go to” Tax personConsider an Income Tax Functional Mailbox

“FHOUINCTAX”


Should Tax Integrate Better with Other Departments & How? - Cont’d

We have to get more pro-active BUT the rest of the organization also needs to get more focused on tax and our voice needs to be heard more It’s a battle to make a difference when you

don’t have the “ears” of the organization



DATA


Data Management & Availability

Critical Tax Planning Data Points & Where They Currently Reside: DCL: Excel Spreadsheet & Talisman Report E&P, Tax Pool & Tax/Stock Basis: E&P/Tax Pool –

Current Year in CorpTax, Prior years – Excel Spreadsheet. Initiative Underway to Reside on a Talisman Application.

Gain Recognition Agreements (GRA): Talisman FTC Limitation/CB/CF: CorpTax Dividend Planning Tool: Initiative Underway to

Reside on a Talisman Application


Data Management & Availability Continued

NOL: Talisman State Apportionment Factors: CorpTax &

Spreadsheets Tax Treaty Information: Outside Publications Overall Tax Return Metrics: US return in CorpTax Global Financial Data: Current Sources are SAP,

Hyperion, HFM, Essbase, Talisman, Business Objects Forecasted Financial Data: Current Sources are

Talisman & HFM Transfer Pricing: SAP Reports



DTA & DTL: Intl - FIT/Talisman , US -TIS/Excel Tax Systems Project Team recommends conversion

from CorpTax to ONESOURCE Phased in to 1st Qtr 2013 ONESOURCE , Utilizing the ORBITTAX Module, Will

Enable Us to Perform Sophisticated Repatriation Planning Including Best Effective Tax Rate Analysis Taking into Consideration Withholding & Tax Treaties



ONESOURCE Provides a Single Tax System Platform Supporting: Global Provision and US Compliance Tax Planning and Tax Controversy Processes Future Leveraging to Support Local Country

Compliance Visibility of Global Tax Attributes

Obtaining Longer Term and Accurate Forecast Financial Data as well as Good Statutory Financial Data are Needs Going Forward


Planning Initiative No.4

Incentivize


Incentivize Halliburton Organization To Reduce ETR

Create environment where all groups inside Halliburton are motivated to lower ETR Issue of “above the line” vs. “below the line”

Explored with Tim Probert and Dale French the idea of tax savings being factored into above the line results for management/bonus purposes Probert expressed concern about distracting PSLs

and country managers, i.e. focusing on tax and not on the businessBelieved there are other ways to incentivize such

as through MVP


Incentivize Halliburton Organization To Reduce ETR - Cont’d

Dale French expressed concern about how this would be calculated & done at the accounting level

Both PwC and EY confirmed the vast majority of companies are aligned with Halliburton in that operations are incentivized with before tax results

Key is to create corporate culture such that all groups are focused on improving the after tax results

Take Away: Issue is to push this concept down to the mid-level management



Improve Project Management


Planning Process Idea Generation Review / Analyze Request Information

Data Inputs from F&A, Legal, Others

Evaluate Decision – Pursue / Reject Prepare Business Case Approval OSCR Process Implementation


Project Management

Best Practices Identified: Develop a Protocol for Privileged Information –

Estimated Completion Date: 7/31/11 Develop Check Lists to Ensure Business & Tax

Requirements are met – Estimated Completion Date 7/31/11.

Audit “Implementation” by the Planning Group or Internal Audit to Ensure Transactions are Flowing in Accordance with the Plan.

Assign a Tax Department Person to Review Old OSCRs for Completeness or Abandonment – Estimated Completion Date: 7/31/11


Questions /Comments