Hertz 2014 Annual Report Download - page 162

Table of Contents
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The significant items in the reconciliation of the statutory and effective income tax rates consisted of the following:
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Statutory Federal Tax Rate 35 %
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35 %
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35 %
Foreign tax differential 69
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(3)
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(4)
State and local income taxes, net of federal income tax benefit (11)
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5
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3
Change in state statutory rates, net of federal income tax benefit (52)
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—
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(1)
Federal and foreign permanent differences (52)
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5
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4
Withholding taxes (36)
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2
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2
Uncertain tax positions (45)
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(1)
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(1)
Change in valuation allowance (74)
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7
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11
All other items, net (91)
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—
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1
Effective Tax Rate (257)%
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50 %
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50 %
The effective tax rate for the year ended December 31, 2014 was (257)% as compared to 50% in the year ended December 31, 2013. The
provision for taxes on income decreased $242 million, primarily due to lower income before income taxes, changes in geographic earnings mix,
and decreased state and local tax rates and a decrease in the valuation allowance relating to losses in certain non-US jurisdictions for which tax
benefits are not realized, offset by an increase in unrecognized tax benefits accrued during the year and non-deductible transaction costs.
As of December 31, 2014, the Company's foreign subsidiaries have $650 million of undistributed earnings which could be subject to taxation if
repatriated. Due to the Company's legal structure, the foreign earnings subject to taxation upon distribution could be less. Deferred tax liabilities
have not been recorded for such earnings because it is management’s current intention to permanently reinvest such undistributed earnings
offshore. Due to the uncertainty caused by the various methods in which such earnings could be repatriated, it is not practicable to estimate the
actual amount of such deferred tax liabilities. If such earnings were repatriated and subject to taxation at the current U.S. federal tax rate, the tax
liability, including the impact of foreign withholding taxes would be approximately $250 million, excluding the impact of potential foreign tax credits.
The Company would consider and pursue appropriate alternatives to reduce the tax liability 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 and deferred tax liabilities will be recorded.
As of December 31, 2014, total unrecognized tax benefits were $57 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:
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Balance at January 1 $ 11
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$ 19
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$ 41
Increase (Decrease) attributable to tax positions taken during prior periods 4
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(7)
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(25)
Increase attributable to tax positions taken during the current year 42
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3
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3
Decrease attributable to settlements with taxing authorities —
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(4)
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—
Balance at December 31 $ 57
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$ 11
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$ 19
The Company conducts business globally and, as a result, files one or more income tax returns in the U.S. and non-U.S. jurisdictions. In the
normal course of business the Company is subject to examination by taxing authorities throughout the world. The open tax years for these
jurisdictions span from 2003 to 2014. The Internal Revenue service completed their audit of the Company's 2007 to 2011 tax returns and had no
changes to the previously filed tax returns. Several U.S. state and non-U.S. jurisdictions are under audit.
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Source: HERTZ GLOBAL HOLDINGS INC, 10-K, July 16, 2015 Powered by Morningstar® Document Research℠
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