Big Lots 2011 Annual Report Download - page 182

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BIG LOTS, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements (Continued)
Note 9 — Income Taxes (Continued)
Based on the weight of currently available evidence, we have fully reduced the provisional amount of net
deferred income tax assets (including a net operating loss carryforward) of Big Lots Canada (see note 11),
as well as the deferred tax benefit of the loss generated by our Canadian segment since the acquisition, by a
valuation allowance.
We have the following income tax loss and credit carryforwards at January 28, 2012 (amounts are shown net of
tax excluding the federal income tax effect of the state and local items):
(In thousands)
Non-U.S.:
Net operating loss carryforwards .................. $19,019 Expires fiscal years 2026 through 2031
U.S. State and local:
State net operating loss carryforwards .............. 1,092 Expires fiscal years 2014 through 2025
California enterprise zone credits.................. 4,931 No expiration date
Texas business loss credits....................... 285 Expires fiscal years through 2025
Total income tax loss and credit carryforwards .... $25,327
Income taxes payable on our consolidated balance sheets have been reduced by the tax benefits primarily
associated with share-based compensation. We receive an income tax deduction upon the exercise of
non-qualified stock options and the vesting of restricted stock. Tax benefits of $2.7 million, $13.8 million, and
$0.6 million in 2011, 2010, and 2009, respectively, were credited directly to shareholders’ equity related to
share-based compensation deductions in excess of expense recognized for these awards.
The Company’s Canadian subsidiary has an accumulated retained deficit, thus we have not provided for income
taxes in the United States on undistributed earnings.
The following is a tabular reconciliation of the total amounts of unrecognized tax benefits for 2011, 2010,
and 2009:
2011 2010 2009
(In thousands)
Unrecognized tax benefits - opening balance ....................... $27,250 $35,824 $ 34,729
Gross increases - tax positions in current year . . . . . . . . . . . . . . . . . . . . . . . . . 2,179 1,127 11,757
Gross increases - tax positions in prior period . . . . . . . . . . . . . . . . . . . . . . . . . 616 1,237 5,556
Gross decreases - tax positions in prior period ......................... (9,513) (1,190) (4,101)
Settlements .................................................... (2,581) (9,121) (11,944)
Lapse of statute of limitations ...................................... (1,196) (627) (173)
Unrecognized tax benefits - end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . $16,755 $27,250 $ 35,824
At the end of 2011 and 2010, the total amount of unrecognized tax benefits that, if recognized, would affect
the effective income tax rate is $11.0 million and $20.1 million, respectively, after considering the federal tax
benefit of state and local income taxes of $4.9 million and $5.3 million respectively. Unrecognized tax benefits
of $0.9 million and $1.9 million, respectively, relate to tax positions for which the ultimate deductibility is
highly certain but for which there is uncertainty about the timing of such deductibility. The uncertain timing
items could result in the acceleration of the payment of cash to the taxing authority to an earlier period.
For 2011, unrecognized tax benefits decreased by approximately $9.1 million related to our claims for welfare
to work and work opportunity credits, which claims have either lapsed or are unlikely to be realized due to an
unfavorable decision of U.S. Court of Appeals for the Federal Circuit against a similarly situated taxpayer. Our
right to file a refund claim with respect to approximately $4.2 million of the credits has lapsed and our right to
file a refund claim with respect to approximately $0.7 million of the credits will lapse by December 21, 2012.
Our right to file a refund claim with respect to approximately $4.2 million of the credits may never lapse