Hertz 2009 Annual Report Download - page 161

HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
recorded. The increase in liabilities was recorded as of January 1, 2007 as an increase of $3.6 million to
‘‘Accumulated Deficit’’ which is reflected in our consolidated balance sheet and an increase of
$15.3 million to ‘‘Goodwill’’ which is reflected in our consolidated balance sheet.
On the adoption date, total unrecognized tax benefits were $20.3 million. As of December 31, 2009, total
unrecognized tax benefits were $25.6 million, all of which, if recognized, would favorably impact the
effective tax rate in future periods.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in
millions of dollars):
2009 2008 2007
Balance at January 1 ....................................... $21.7 $ 35.5 $20.3
Increase (decrease) attributable to tax positions taken during prior periods . 1.1 (5.7) 6.4
Increase attributable to tax positions taken during the current year ....... 3.1 5.2 9.5
Decrease attributable to settlements with taxing authorities ............ (0.3) (13.3) (0.7)
Balance at December 31 ..................................... $25.6 $ 21.7 $35.5
We conduct business globally and, as a result, file one or more income tax returns in the U.S. federal
jurisdiction and various state and non-U.S. jurisdictions. In the normal course of business we are subject
to examination by taxing authorities throughout the world. The open tax years for these jurisdictions
span from 1998 to 2009. A tax indemnification agreement entered into with Ford on the Closing Date
indemnifies Hertz from U.S. federal and unitary state, and certain combined non-U.S. income tax
liabilities for all periods prior to December 21, 2005. We are not currently under audit by the Internal
Revenue Service. Several U.S. state and non-U.S. jurisdictions are under audit.
In many cases the uncertain tax positions are related to tax years that remain subject to examination by
the relevant taxing authorities. It is reasonable that approximately $5.3 million of unrecognized tax
benefits may reverse within the next twelve months due to settlement with the relevant taxing authorities
and/or the filing of amended income tax returns.
Net, after-tax interest and penalties related to the liabilities for unrecognized tax benefits are classified as
a component of ‘‘(Provision) benefit for taxes on income’’ in the consolidated statement of operations.
During 2009, approximately $(0.2) million in net, after-tax interest and penalties were recognized.
Approximately $5.8 million of net, after-tax interest and penalties are accrued in the consolidated
balance sheet at December 31, 2009. During 2008, approximately $0.6 million was recognized in net,
after-tax interest and penalties. Approximately $6.0 million of net, after-tax interest and penalties was
accrued in our consolidated balance sheet at December 31, 2008. During 2007, approximately
$2.2 million was recognized in net, after-tax interest and penalties. Approximately $12.0 million of net,
after-tax interest and penalties was accrued in our consolidated balance sheet at December 31, 2007.
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