Aarons 2015 Annual Report Download - page 77
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The Company’s effective tax rate differs from the statutory United States Federal income tax rate for the years ended December 31 as follows:
Statutory Rate 35.0 %
35.0 %
35.0 %
Increases (Decreases) in United States Federal Taxes
Resulting From:
State Income Taxes, Net of Federal Income Tax Benefit 2.7
2.6
3.1
Federal Tax Credits (.5)
(1.8)
(1.7)
Other, Net (.9)
(.1)
(1.6)
Effective Tax Rate 36.3 %
35.7 %
34.8 %
The Company files a federal consolidated income tax return in the United States and the separate legal entities file in various states and foreign jurisdictions.
With few exceptions, the Company is no longer subject to federal, state and local tax examinations by tax authorities for years before 2012.
The following table summarizes the activity related to the Company’s uncertain tax positions:
Balance at January 1, $ 2,644
$ 1,960
$ 1,258
Additions Based on Tax Positions Related to the Current Year 331
311
454
Additions for Tax Positions of Prior Years 1,176
928
423
Prior Year Reductions (1)
(370)
(5)
Statute Expirations (589)
(94)
(85)
Settlements —
(91)
(85)
Balance at December 31, $ 3,561
$ 2,644
$ 1,960
As of December 31, 2015 and 2014, the amount of uncertain tax benefits that, if recognized, would affect the effective tax rate is $3.1 million and
$2.1 million, respectively, including interest and penalties.
The Company recognized interest and penalties of $365,000, $286,000 and $76,000 during the years ended December 31, 2015, 2014 and 2013 respectively.
The Company had $1.0 million and $499,000 of accrued interest and penalties at December 31, 2015 and 2014, respectively. The Company recognizes
potential interest and penalties related to uncertain tax benefits as a component of income tax expense.
Leases
The Company leases warehouse and retail store space for most of its store-based operations, call center space, and management and information technology
space for corporate functions under operating leases expiring at various times through 2033. The Company also leases certain properties under capital or
financing type leases that are more fully described in Note 7 to these consolidated financial statements. Most of the leases contain renewal options for
additional periods ranging from one to 20 years. In addition, certain properties occupied under operating leases contain normal purchase options. Leasehold
improvements related to these leases are generally amortized over periods that do not exceed the lesser of the lease term or 15 years. While a majority of
leases do not require escalating payments, for the leases which do contain such provisions, the Company records the related expense on a straight-line basis
over the lease term. The Company also leases transportation vehicles under operating leases. Management expects that most leases will be renewed or
replaced by other leases in the normal course of business.
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