HCA Holdings 2011 Annual Report Download - page 127

HCA HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
NOTE 5 — INCOME TAXES (Continued)
A summary of the items comprising the deferred tax assets and liabilities at December 31 follows (dollars in
millions):
2011 2010
Assets Liabilities Assets Liabilities
Depreciation and fixed asset basis differences ......... $ — $402 $ — $211
Allowances for professional liability and other risks .... 337 — 329 —
Accounts receivable .............................. 706 — 1,011 —
Compensation .................................. 216 — 202 —
Other .......................................... 698 511 776 400
$1,957 $913 $2,318 $611
At December 31, 2011, state net operating loss carryforwards (expiring in years 2012 through
2031) available to offset future taxable income approximated $34 million. Utilization of net operating loss
carryforwards in any one year may be limited and, in certain cases, result in an adjustment to intangible assets.
Net deferred tax assets related to such carryforwards are not significant.
At December 31, 2011, we were contesting, before the IRS Appeals Division, certain claimed deficiencies
and adjustments proposed by the IRS Examination Division in connection with its audit of HCA Inc.’s 2005 and
2006 federal income tax returns. The disputed items include the timing of recognition of certain patient service
revenues, the deductibility of certain debt retirement costs and our method for calculating the tax allowance for
doubtful accounts. The IRS Examination Division began an audit of HCA Inc.’s 2007, 2008 and 2009 federal
income tax returns in 2010.
The following table summarizes the activity related to our unrecognized tax benefits (dollars in millions):
2011 2010
Balance at January 1 ................................................... $313 $ 485
Additions (reductions) based on tax positions related to the current year ........... 83 (18)
Additions for tax positions of prior years ................................... 73 61
Reductions for tax positions of prior years .................................. (15) (78)
Settlements ........................................................... —(134)
Lapse of applicable statutes of limitations ................................... (9) (3)
Balance at December 31 ................................................ $445 $ 313
During 2011, we finalized settlements with the IRS Examination Division resolving all outstanding issues
for our 1997 through 2004 tax years. During 2010, we finalized settlements with the Appeals Division of the IRS
resolving the deductibility of our 2003 government settlement payment, the timing of certain patient service
revenues for 2003 and 2004 and the method for calculating the tax allowance for doubtful accounts for certain
affiliated partnerships for 2003 and 2004.
Our liability for unrecognized tax benefits was $494 million, including accrued interest of $62 million and
excluding $13 million that was recorded as reductions of the related deferred tax assets, as of December 31, 2011
($413 million, $115 million and $15 million, respectively, as of December 31, 2010). Unrecognized tax benefits
of $173 million ($190 million as of December 31, 2010) would affect the effective rate, if recognized. The
F-22