KPMG Partner Files Declaration in Microsoft Summons Enforcement Case

1. I am a partner at KPMG LLP ("KPMG"), a Delaware limited liability partnership that provides audit, tax and advisory services.

2. I currently serve as partner in charge of KPMG's Tax Transparency Services, and head KPMG's international tax practice for its West Region. In addition, I currently serve as an adjunct professor at the University of Washington School of Law Masters of Law in Tax (LL.M.) program.

3. I hold Bachelor of Arts and Masters of Taxation degrees from Weber State University, and am a licensed Certified Public Accountant in the State of Washington.

4. I became a licensed CPA on March 9, 1988, and have maintained my CPA licensure from that date to the present. I am a member of the Washington Society of Certified Public Accountants and the American Institute of Certified Public Accountants.

5. I joined KPMG, as a partner, in May of 2002.

6. Prior to joining KPMG, I was a partner at the former global accounting firm Arthur Andersen. I joined Arthur Andersen in 1985, and became a partner in July of 1996.

7. I began my professional relationship with Microsoft Corporation ("Microsoft") decades ago, when I was a tax manager at Arthur Andersen, and have continued that relationship as one of Microsoft's tax advisors through to the present date.

8. KPMG's relationship with Microsoft, both through me and through others at KPMG, is longstanding.

9. Throughout the regular course of our relationship, first at Arthur Andersen and then at KPMG, Microsoft has regularly sought tax advice from me on a wide variety of tax issues. This tax advice was, and currently is, typically billed to Microsoft at an hourly rate.

10. In 2004, Microsoft approached and subsequently engaged KPMG to provide tax advice and economic services in connection with Microsoft's plan to enter into a cost-sharing arrangement with a wholly owned subsidiary operating in Puerto Rico (the "Americas Cost Sharing Arrangement").

11. I served as the project partner for KPMG's engagement for the Americas Cost Sharing Arrangement. As project partner, I personally oversaw and coordinated KPMG's engagement.

12. Our tax advice included advising on the rules applicable to cost sharing arrangements, and advising on the applicable United States tax laws and regulations that govern the operations of wholly-owned subsidiaries of United States corporations that operate outside the United States.

13. I was supported by other KPMG tax professionals acting under my supervision and direction. I am a federally authorized tax practitioner under 26 U.S.C. § 7525(a)(3)(A), and I was assisted by a number of other federally-authorized tax practitioners.¹

14. Under my supervision and direction, KPMG evaluated the tax consequences of entering into the Americas Cost Sharing Arrangement and provided related advice to Microsoft as to its planning of the Americas Cost Sharing Arrangement. KPMG rendered this advice to assist Microsoft in its assessment of the tax issues associated with the America's Cost Sharing Arrangement, and to prepare for a potential dispute with the IRS (as discussed below).

15. KPMG rendered tax advice to Microsoft on a wide variety of subsidiary and related issues relating to the tax consequences of the Americas Cost Sharing Arrangement. KPMG based its advice on the Internal Revenue Code, Treasury Regulations, the applicable case law, treatises, and other applicable authorities.

16. Advising clients with respect to the tax consequences of international transactions, such as the Americas Cost Sharing Arrangement, is a routine part of my practice, and I have been providing such tax advice to clients, including Microsoft, for my entire career.

17. To the best of my knowledge, all of KPMG's tax advice services on the Americas Cost Sharing Arrangement were billed to Microsoft at hourly rates. KPMG had no direct financial stake in the outcome of the Americas Cost-Sharing Arrangement.

18. Microsoft's request to KPMG for services in connection with the Americas Cost Sharing Arrangement fell into two general categories. First, Microsoft requested KPMG to provide tax advice in connection with Microsoft's desire to establish the Americas Cost Sharing Arrangement. Second, Microsoft requested KPMG to provide 26 U.S.C. § 6662 transfer pricing reports in support of its valuation and pricing determinations for provision to the IRS upon audit.

19. KPMG fulfilled its professional obligations regarding the confidentiality of client information in connection with Microsoft's request for tax advice in connection with its desire to establish the Americas Cost Sharing Arrangement, the analyses performed by KPMG and the tax advice rendered by KPMG in connection with the Americas Cost Sharing Arrangement.

20. At the time KPMG was providing tax advice to Microsoft on the Americas Cost Sharing Arrangement, disputes over transfer pricing between taxpayers and the IRS were common, and disputes particularly over cost sharing arrangements.

At the time Microsoft requested KPMG's advice, Michael Boyle, the head of Microsoft's Tax Department, expressed his view that the IRS would challenge the Americas Cost Sharing Arrangement. Boyle, a lawyer, made plain that he was hiring KPMG to also help Microsoft prepare its defense to the IRS's challenge. I was aware that the IRS was actively auditing other taxpayers on this issue. I anticipated at the time that the Americas Cost Sharing Arrangement would be challenged by the IRS, which proved to be correct. As requested by Microsoft, KPMG provided tax advice not only to assist Microsoft in evaluating and planning the Americas Cost Sharing Arrangement under the tax law, but also to assist Microsoft in preparing for a potential dispute with the IRS.

21. In formulating its tax advice on the tax consequences of the Americas Cost Sharing Arrangement, KPMG created numerous documents, including emails and documents internal to KPMG. To the best of my knowledge, the documents identified in the attached Appendix were created as part of KPMG's provision of tax advice to Microsoft and were not created as part of tax return preparation or in connection with 26 U.S.C. § 6662 transfer pricing reports. To the best of my knowledge, KPMG fulfilled its professional obligations regarding the confidentiality of these materials.

I declare under penalty of perjury that the foregoing is true and correct.

Executed on this 12th day of September, 2016 in Seattle, Washington.