ADP 2013 Annual Report Download - page 73

outside of the United States. The additional U.S. income tax that would arise on repatriation of the remaining undistributed earnings could be
offset, in part, by foreign tax credits on such repatriation. However, it is impractical to estimate the amount of net income tax that might be
payable.
The Company has estimated foreign net operating loss carry-forwards of approximately $132.1 million as of June 30, 2013 , of which $64.8
million expire through 2033 and $67.3 million has an indefinite utilization period. As of June 30, 2013 , the Company has approximately $98.2
million of federal net operating loss carry-forwards from acquired companies. The net operating losses have an annual utilization limitation
pursuant to section 382 of the Internal Revenue Code and expire through 2031 .
The Company has state net operating loss carry-forwards of approximately $212.9 million as of June 30, 2013 , which expire through 2032 .
The Company has recorded valuation allowances of $49.4 million and $54.8 million at June 30, 2013 and 2012 , respectively, to reflect the
estimated amount of domestic and foreign deferred tax assets that may not be realized.
Income tax payments were approximately $693.0 million , $660.3 million , and $628.7 million for fiscal 2013 , 2012 , and 2011 , respectively.
As of June 30, 2013 , 2012 , and 2011 the Company's liabilities for unrecognized tax benefits, which include interest and penalties, were $70.7
million , $84.7 million , and $105.7 million respectively. The amount that, if recognized, would impact the effective tax rate is $38.8 million ,
$43.7 million , and $56.3 million , respectively. The remainder, if recognized, would principally affect deferred taxes.
A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:
Interest expense and penalties associated with uncertain tax positions have been recorded in the provision for income taxes on the Statements of
Consolidated Earnings. During the fiscal years ended June 30, 2013 , 2012 , and 2011 , the Company recorded interest expense of $0.4 million ,
$1.2 million , and $1.7 million , respectively. Penalties incurred during fiscal years ended June 30, 2013 , 2012 , and 2011 were no t material.
At June 30, 2013 , the Company had accrued interest of $12.2 million recorded on the Consolidated Balance Sheets, of which $1.2 million was
recorded within income taxes payable, and the remainder was recorded within other liabilities. At June 30, 2012 , the Company had accrued
interest of $14.4 million recorded on the Consolidated Balance Sheets, of which $1.6 million was recorded within income taxes payable, and the
remainder was recorded within other liabilities. At June 30, 2013 , the Company had accrued penalties of $1.0 million recorded on the
Consolidated Balance Sheets, of which $0.1 million was recorded within income taxes payable, and the remainder was recorded within other
liabilities. At June 30, 2012 , the Company had accrued penalties of $2.1 million recorded on the Consolidated Balance Sheets, of which $0.7
million was recorded within income taxes payable, and the remainder was recorded within other liabilities.
The Company is routinely examined by the IRS and tax authorities in foreign countries in which it conducts business, as well as tax authorities
in states in which it has significant business operations. The tax years currently under examination vary by jurisdiction. Examinations in progress
in which the Company has significant business operations are as follows:
64
Fiscal
2013
Fiscal 2012 Fiscal 2011
Unrecognized tax benefits at beginning of the year
$
84.7
$
105.7
$
107.2
Additions for tax positions
5.0
8.0
9.7
Reductions for tax positions
—
(
0.8
)
(2.4
)
Additions for tax positions of prior periods
5.3
13.0
17.3
Reductions for tax positions of prior periods
(3.7
)
(21.6
)
(23.3
)
Settlement with tax authorities
(12.0
)
(4.2
)
(4.5
)
Expiration of the statute of limitations
(9.7
)
(9.8
)
(0.4
)
Impact of foreign exchange rate fluctuations
1.1
(5.6
)
2.1
Unrecognized tax benefit at end of year
$
70.7
$
84.7
$
105.7