Citrix 2014 Annual Report Download - page 98

CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
F-30
A reconciliation of the Company’s effective tax rate to the statutory federal rate is as follows:
Year Ended December 31,
2014 2013 2012
Federal statutory taxes 35.0% 35.0% 35.0%
State income taxes, net of federal tax benefit 1.2 1.2 1.9
Foreign operations (13.8)(14.8)(10.2)
Permanent differences 3.3 (1.1)(2.0)
Change in deferred tax liability related to acquired intangibles (5.9)— —
Tax credits (13.7)(10.9)(4.7)
Stock option compensation 1.9 0.4 0.1
Change in accruals for uncertain tax positions (0.3) 3.3 (5.3)
Other 1.0 (0.6)(0.7)
8.7% 12.5% 14.1%
The Company’s effective tax rate generally differs from the U.S. federal statutory rate of 35% due primarily to lower tax
rates on earnings generated by the Company’s foreign operations that are taxed primarily in Switzerland. The Company has not
provided for U.S. taxes for those earnings because it plans to reinvest all of those earnings indefinitely outside the United
States. It was not practicable to determine the amount of unrecognized deferred tax liability for temporary differences related to
investments in foreign subsidiaries.
The Company and certain of its subsidiaries are subject to U.S. federal income taxes, as well as income taxes of multiple
state and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-
U.S. income tax examinations by tax authorities for years prior to 2011.
During the quarter ended June 30, 2014, the Internal Revenue Service (“IRS”) concluded its field examination of the
Company's 2009 and 2010 tax years and issued proposed adjustments primarily related to transfer pricing and the research and
development tax credit. In June 2014, the Company finalized its tax deficiency calculations and formally closed the audit with
the IRS for the 2009 and 2010 tax years. As a result, the Company recognized a net tax benefit related to the settlement of all
tax issues with the IRS for the 2009 and 2010 tax years, the impact on subsequent years and the reduction of the Company’s
uncertain tax positions for the closed tax years of $9.3 million during the second quarter of 2014.
A reconciliation of the beginning and ending amount of unrecognized tax benefits for the years ended December 31, 2014
and 2013 is as follows (in thousands):
Balance at January 1, 2013 $ 43,904
Additions based on tax positions related to the current year 13,694
Additions for tax positions of prior years 10,611
Reductions related to the expiration of statutes of limitations (2,116)
Settlements (2,301)
Balance at December 31, 2013 63,792
Additions based on tax positions related to the current year 5,711
Additions for tax positions of prior years 12,998
Reductions related to the expiration of statutes of limitations (4,118)
Settlements (11,465)
Balance at December 31, 2014 $ 66,918
The Company's unrecognized tax benefits may change significantly over the next 12 months due to the possible closing
of an ongoing examination.
In July 2013, the FASB issued an accounting standard update that provides explicit guidance on the financial statement
presentation of an unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit