Hertz 2011 Annual Report Download - page 154

HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The effective tax rate for the year ended December 31, 2011 was 39.6% as compared to (113.8)% in the
year ended December 31, 2010. The provision for taxes on income increased $111.8 million, primarily
due to higher income before income taxes, changes in geographic earnings mix and changes in
valuation allowances for losses in certain non-U.S. jurisdictions for which tax benefits cannot be realized.
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 and the impact of the France law
change in 2010.
As of December 31, 2011, 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, 2011, total unrecognized tax benefits were $21.6 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):
2011 2010 2009
Balance at January 1 ........................................ $27.2 $25.6 $21.7
Increase (decrease) attributable to tax positions taken during prior periods . (9.5) 0.3 1.1
Increase attributable to tax positions taken during the current year ....... 3.9 1.3 3.1
Decrease attributable to settlements with taxing authorities ............. — — (0.3)
Balance at December 31 ..................................... $21.6 $27.2 $25.6
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 2003 to 2011. We
are currently under audit by the Internal Revenue Service for tax years 2006 to 2009. 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 $7.2 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 the years ended December 31, 2011, 2010 and 2009, approximately $1.9 million, $0.2 million and
$(0.2) million, respectively, in net, after-tax interest and penalties were recognized. As of December 31,
2011 and 2010, approximately $3.7 million and $1.8 million, respectively, of net, after-tax interest and
penalties was accrued in our consolidated balance sheet.
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