AutoNation 2006 Annual Report Download - page 63

Table of Contents


Deferred income tax asset and liability components at December 31 are as follows:
 
Deferred income tax assets:
Inventory $ (8.3) $ (8.9)
Receivable reserves (5.6) (5.4)
Warranty, chargeback and self-insurance liabilities (58.0) (57.1)
Other accrued liabilities (31.0) (28.3)
Other, net (31.4) (22.6)
Loss carryforwards — Federal and State (17.2) (20.2)
(151.5) (142.5)
Valuation allowances 12.3 14.8
Deferred income tax liabilities:
Long-lived assets (intangibles and property) 283.7 232.4
Other, net 6.1 5.1
289.8 237.5
Net deferred income tax (assets) liabilities $ 150.6 $ 109.8
At December 31, 2006 and 2005, current deferred income tax assets of $74.8 million and $76.4 million, respectively, are classified
as Other Current Assets in the accompanying Consolidated Balance Sheets.
At December 31, 2006, income taxes refundable included in Accounts Receivable totaled $28.9 million. At December 31, 2005,
income taxes payable included in Other Current Liabilities totaled $88.5 million.
At December 31, 2006, the Company had $6.6 million of federal capital loss carryforwards in addition to gross domestic state net
operating loss carryforwards and capital loss carryforwards totaling approximately $334.7 million (representing a deferred tax asset of
$17.2 million), which expire from 2007 through 2027. At December 31, 2006, the Company had $12.3 million of valuation allowance
related to these loss carryforwards. In assessing the realizability of deferred tax assets, management considers whether it is more likely
than not that some portion or all of the deferred tax assets will not be realized. The Company provides valuation allowances to offset
portions of deferred tax assets due to uncertainty surrounding the future realization of such deferred tax assets. The Company adjusts the
valuation allowance in the period management determines it is more likely than not that deferred tax assets will or will not be realized.
Certain decreases to valuation allowances are offset against intangible assets associated with business acquisitions accounted for under
the purchase method of accounting.
In March 2003, the Company entered into a settlement agreement with the IRS with respect to the tax treatment of certain transactions
the Company entered into in 1997 and 1999. In 2004, the Company paid the remaining balance due related to the IRS settlement totaling
$128.9 million, including accrued interest.
During 2005 and 2004, the Company recorded net income tax benefits to the provision for income taxes totaling $14.5 million and
$25.8 million, respectively, primarily related to the resolution of various income tax matters. The Company also recognized income of
$110.0 million and $52.2 million included in Discontinued Operations in 2005 and 2004, respectively, related to the settlement of various
income tax matters.
As a matter of course, various taxing authorities, including the IRS, regularly audit the Company. Currently, the IRS is auditing the
tax years from 2002 to 2004. These audits may result in proposed assessments where the ultimate resolution may result in the Company
owing additional taxes. The Company believes that its tax positions comply with applicable tax law and that it has adequately provided
for these matters. Included in Other Current
62