Advance Auto Parts 2008 Annual Report Download - page 80

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ADVANCE AUTO PARTS, INC. AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS – (Continued)
January 3, 2009, December 29, 2007 and December 30, 2006
(in thousands, except per share data)
The accompanying notes to the consolidated financial statements
are an integral part of these statements.
F-26
Unrecognized Tax Benefits
January 3, December 29,
2009 2007
Unrecognized tax benefits, beginning of period 14,145$ 16,453$
Gross increases related to prior period tax positions 514 1,279
Gross decreases related to prior period tax positions (1,280) (1,853)
Gross increases related to current period tax positions 1,882 5,340
Settlements (317) (539)
Expiration of statute of limitations (1,147) (271)
Unrecognized tax benefits, end of period 13,797$ 20,409$
As of January 3, 2009 the entire amount of unrecognized tax benefits, if recognized, would reduce the
Company’s annual effective tax rate.
The Company has chosen to provide for potential interest and penalties associated with uncertain tax positions
as a part of income tax expense. During fiscal 2008, the Company accrued potential interest and penalties of $1,550
and $207, respectively, related to these unrecognized tax benefits. During fiscal 2007, the Company accrued
potential interest and penalties of $1,827 and $709. As of January 3, 2009, the Company had recorded a liability for
potential interest and penalties of $5,022 and $1,743, respectively. As of December 29, 2007, the Company had
recorded a liability for potential interest and penalties of $4,421 and $1,843, respectively, which was included in the
above table. The Company has not provided for any penalties associated with tax contingencies unless considered
probable of assessment. The Company does not expect its unrecognized tax benefits to change significantly over the
next 12 months.
During the next 12 months, it is possible the Company could conclude on approximately $2,000 to $3,000 of the
contingencies associated with unrecognized tax uncertainties due mainly to the conclusion of audits and the
expiration of statutes of limitations. The majority of these resolutions would be achieved through the completion of
current income tax examinations.
The Company files U.S. and state income tax returns in jurisdictions with varying statutes of limitations. The
2006 year is currently under examination with the Internal Revenue Service. The 2005 through 2008 tax years
generally remain subject to examination by federal and most state taxing authorities. One major tax jurisdiction has
an examination pending final settlement for periods prior to 2005. In management’s opinion, any amounts assessed
will not have a material effect on the Company’s financial position, results of operations or liquidity.
Provision for Income Taxes
Provision (benefit) for income taxes from continuing operations for fiscal 2008, 2007 and 2006 consists of the
following: