Callaway 2014 Annual Report Download - page 96

F-28
A reconciliation of the effective tax rate on income or loss and the statutory tax rate is as follows:
Years Ended December 31,
2014 2013 2012
Statutory U.S. tax rate..................................................................................................... 35.0 % 35.0 % 35.0 %
State income taxes, net of U.S. tax benefit ..................................................................... 1.9 % 0.9 % (0.8)%
Federal and State tax credits, net of U.S. tax benefit...................................................... (9.8)% 22.6 % (0.1)%
Expenses with no tax benefit .......................................................................................... 1.1 % (0.3)% (0.1)%
Foreign income taxed at other than U.S. statutory rate .................................................. (13.4)% (5.1)% 2.5 %
Effect of foreign rate changes......................................................................................... 1.3 % (4.2)% (0.6)%
Foreign tax credit............................................................................................................ (13.5)% 9.4 % (1.2)%
Basis differences of intangibles with an indefinite life................................................... 0.1 % (4.1)% 1.3 %
Change in deferred tax valuation allowance................................................................... 35.3 % (76.8)% (37.7)%
Reversal of previously accrued taxes ............................................................................. — % — % 0.1 %
Accrual for interest and income taxes related to uncertain tax positions ....................... (7.3)% (0.1)% 0.8 %
Income (loss) from flowthrough entities ........................................................................ (1.9)% 1.3 % (0.4)%
Meals and entertainment................................................................................................. 3.3 % (7.2)% (0.8)%
Group loss relief ............................................................................................................. (2.6)% 4.9 % 0.6 %
Stock option compensation............................................................................................. 2.3 % (6.9)% (0.1)%
Foreign dividends and earnings inclusion ...................................................................... (0.9)% (6.8)% — %
Foreign tax withholding.................................................................................................. 2.4 % (1.5)% (0.2)%
Other ............................................................................................................................... (7.3)% (3.1)% (2.5)%
Effective tax rate........................................................................................................ 26.0 % (42.0)% (4.2)%
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
2014 2013 2012
Balance at January 1 ....................................................................................................... $ 11,851 $ 7,064 $ 9,875
Additions based on tax positions related to the current year................................... 638 4,853 432
Additions for tax positions of prior years................................................................ 121 545 96
Reductions for tax positions of prior years.............................................................. (3,691)(538)(24)
Settlement of tax audits ........................................................................................... (258)—
(768)
Reductions due to lapsed statute of limitations ....................................................... (2,102)(73)(2,547)
Balance at December 31 ................................................................................................. $ 6,559 $ 11,851 $ 7,064
As of December 31, 2014, the liability for income taxes associated with uncertain tax benefits was $6,559,000 and can
be reduced by $1,692,000 of offsetting tax benefits associated with the correlative effects of potential transfer pricing
adjustments, which was recorded as a long-term income tax receivable, as well as $3,765,000 of deferred taxes. The net amount
of $1,102,000, if recognized, would affect the Company’s financial statements and favorably affect the Company’s effective
income tax rate.
The Company does expect changes to the unrecognized tax benefits in the next 12 months; however, the Company does
not expect the changes to have a material impact on its results of operations or its financial position.
The Company recognizes interest and/or penalties related to income tax matters in income tax expense. For the year
ended December 31, 2014, the Company recognized a tax benefit of approximately $101,000, and tax expense of approximately
$229,000 and $44,000 for the years ended December 31, 2013 and 2012, respectively, related to interest and penalties in the
provision for income taxes. As of December 31, 2014 and 2013, the gross amount of accrued interest and penalties included
in income taxes payable in the accompanying consolidated balance sheets was $1,062,000 and $1,163,000, respectively.