HR Block 2015 Annual Report Download - page 76

H&R Block, Inc. | 2015 Form 10-K 69
Changes in unrecognized tax benefits for fiscal years 2015, 2014 and 2013 are as follows:
(in 000s)
Year ended April 30, 2015 2014 2013
Balance, beginning of the year $ 111,491 $ 146,391 $ 206,393
Additions based on tax positions related to prior years 15,510 9,743 11,867
Reductions based on tax positions related to prior years (38,783) (25,403) (49,493)
Additions based on tax positions related to the current year 22,319 7,399 2,314
Reductions related to settlements with tax authorities (10,450) (23,993) (25,259)
Expiration of statute of limitations (11,423) (11,853) (702)
Foreign currency translation —— (278)
Other (2,396) 9,207 1,549
Balance, end of the year $ 86,268 $ 111,491 $ 146,391
The total gross unrecognized tax benefit ending balance as of April 30, 2015, 2014 and 2013, includes $55.3 million,
$73.7 million and $95.3 million, respectively, which if recognized, would impact our effective tax rate. The difference
results from adjusting the gross balances for such items as federal, state and foreign deferred items, interest and
deductible taxes. We believe it is reasonably possible that the balance of unrecognized tax benefits could decrease
by approximately $9 million within the next twelve months due to settlements of audit issues and expiration of statutes
of limitations.
Interest and penalties, if any, accrued on the unrecognized tax benefits are reflected in income tax expense. The
total gross interest and penalties accrued as of April 30, 2015, 2014 and 2013 totaled $24.7 million, $24.6 million and
$31.7 million, respectively.
We file a consolidated federal income tax return in the U.S. with the Internal Revenue Service (IRS) and file tax
returns in various state and foreign jurisdictions. Tax returns are typically examined and settled upon completion of
the examination, with tax controversies settled either at the examination level or through the appeals process.
In December 2014, the IRS completed their audit of our 2011 and 2012 federal income tax returns. We recorded
the impact of the federal audit and the settlements with several state tax authorities during fiscal year 2015, reducing
uncertain tax benefits by $10.5 million. The Company currently does not have a U.S. federal return under examination;
however, our calendar 2013 federal and state returns and all periods after this date remain open to examination.
NOTE 15: INTEREST INCOME AND INTEREST EXPENSE
The following table shows the components of interest income and expense of continuing operations:
(in 000s)
Year ended April 30, 2015 2014 2013
Interest income:
Emerald Advance lines of credit $ 57,202 $ 56,877 $ 59,657
Mortgage loans, net 11,829 13,810 16,556
Loans to franchisees 8,152 9,494 10,023
AFS securities 8,425 9,664 7,000
Other 7,256 8,249 5,593
$ 92,864 $ 98,094 $ 98,829
Interest expense:
Borrowings $ 45,246 $ 55,279 $ 74,297
Deposits 682 2,109 5,660
$ 45,928 $ 57,388 $ 79,957
The presentation of interest expense on borrowings in the amount of $55.3 million and $74.3 million for fiscal
years 2014 and 2013, respectively, has been restated to correct errors in presentation. We reclassified such interest