Hertz 2010 Annual Report Download - page 141

HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The significant items in the reconciliation of the statutory and effective income tax rates consisted of the
following:
Years ended December 31,
2010 2009 2008
Statutory Federal Tax Rate ................................ 35.0% 35.0% 35.0%
Foreign tax differential ................................... 116.7 21.1 (0.5)
State and local income taxes, net of federal income tax benefit ...... 14.1 6.0 0.7
Change in state statutory rates, net of federal income tax benefit ..... (12.1) 3.5 0.1
Effect of impairment charges ............................... — — (16.6)
Federal permanent differences ............................. 6.3 2.0 0.1
Withholding taxes ....................................... (62.5) (4.8) (0.5)
Uncertain tax positions ................................... (26.7) (2.8) (0.4)
Change in valuation allowance ............................. (202.2) (26.2) (3.8)
All other items, net ...................................... 5.8 1.1 0.1
Effective Tax Rate ..................................... (125.6)% 34.9% 14.2%
The effective tax rate for the year ended December 31, 2010 was (125.6)% as compared to 34.9% in the
year ended December 31, 2009. The negative effective tax rate in 2010 is primarily due to a lower loss
before income taxes in 2010, valuation allowances for losses in certain non-U.S. jurisdictions for which
tax benefits cannot be realized and differences in foreign tax rates versus the U.S. Federal tax rate. The
foreign rate differential includes the effects of changes in foreign statutory tax rates, foreign permanent
differences and the impact of the newly enacted tax law in France which became effective for 2010. The
increase in the 2009 effective tax rate versus 2008 is primarily due to nonrecurring impairment losses in
2008.
As of December 31, 2010, our foreign subsidiaries have an immaterial amount of net undistributed
earnings. Deferred tax liabilities have not been recorded for such earnings because it is management’s
current intention to permanently reinvest undistributed earnings offshore. It is not practicable to estimate
the amount of such deferred tax liabilities. If, in the future, undistributed earnings are repatriated to the
United States, or it is determined such earnings will be repatriated in the foreseeable future, deferred tax
liabilities will be recorded.
As of December 31, 2010, total unrecognized tax benefits were $27.2 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):
2010 2009 2008
Balance at January 1 ....................................... $25.6 $21.7 $ 35.5
Increase (decrease) attributable to tax positions taken during prior periods . 0.3 1.1 (5.7)
Increase attributable to tax positions taken during the current year ....... 1.3 3.1 5.2
Decrease attributable to settlements with taxing authorities ............ — (0.3) (13.3)
Balance at December 31 ..................................... $27.2 $25.6 $ 21.7
We conduct business globally and, as a result, file one or more income tax returns in the U.S. 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 2010. We
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