Comfort Inn 2011 Annual Report Download - page 88
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Table of Contents
Current deferred tax assets (liability)
$ 429
Non-current net deferred tax assets
24,435
Net deferred tax assets
$ 24,864
The statutory United States federal income tax rate reconciles to the effective income tax rates as follows:
Statutory U.S. federal income tax rate
35.0 %
35.0 %
State income taxes, net of federal tax benefit
1.6 %
1.7 %
Benefits and taxes related to foreign operations
(2.7)%
(2.4)%
Unrecognized tax positions
1.3 %
(0.3)%
Adjustment to current and deferred taxes, prior years
(2.1)%
— %
Other
(1.0)%
0.8 %
Effective income tax rates
32.1 %
34.8 %
In 2011 and 2010, the effective income tax rates were 30.1% and 32.1%, respectively. The effective income tax rate for the year ended December 31, 2011
was lower than the United States federal statutory rate of 35% primarily due to the impact of foreign operations, $1.4 million of changes in unrecognized tax
positions and the identification of $2.8 million of additional federal tax benefits, partially offset by state income taxes. Additionally, an adjustment to our
current federal taxes payable of $1.4 million reduced the effective tax rate. The effective income tax rate for the year ended December 31, 2010 was lower than
the United States federal statutory rate of 35% primarily due to a $3.3 million adjustment to our deferred tax assets and the identification of $1.6 million of
additional federal income tax benefits, partially offset by an increase of $1.6 million related to the identification of unrecognized tax positions. The effective
income tax rate for 2010 was also impacted by the effect of foreign operations, partially offset by state income taxes.
As of December 31, 2011 and 2010, the Company’s gross unrecognized tax benefits totaled $4.6 million and $6.0 million, respectively. It is expected
that $4.6 million of the total as of December 31, 2011 would favorably affect the effective tax rate if resolved in the Company’s favor. The following table
presents a reconciliation of the beginning and ending amounts of unrecognized tax benefits:
Balance, January 1
$ 4,246
$5,673
Changes for tax positions of prior years
(18)
(33)
Increases for tax positions related to the current year
2,563
667
Settlements and lapsing of statutes of limitations
(774)
(2,061)
Balance, December 31
$6,017
$ 4,246
It is reasonably possible that the Company’s unrecognized tax benefits could decrease within the next 12 months by as much as $1.4 million due to
settlements and the expiration of applicable statutes of limitations.
The Company is generally no longer subject to income tax examinations for years prior to 2008. The practice of the Company is to recognize interest and
penalties related to income tax matters in the provision for income taxes. The Company did not incur any material interest or penalties for 2011, incurred $1.3
million in 2010 and did not incur any material amounts for 2009. The Company had $1.9 million and $2.1 million of accrued interest and penalties at
December 31, 2011 and 2010, respectively.
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