Kodak 2008 Annual Report Download - page 85

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The Company’s policy regarding interest and/or penalties related to income tax matters is to recognize such items as a component
of income tax (benefit) expense. During the years ended December 31, 2008 and 2007, the Company recognized interest and
penalties of approximately $10 million and $10 million, respectively, in income tax (benefit) expense. Additionally, the Company had
approximately $61 million and $51 million of interest and penalties associated with uncertain tax benefits accrued as of December
31, 2008 and 2007, respectively.
If the unrecognized tax benefits were recognized, they would favorably affect the effective income tax rate in any future periods.
Consistent with the provisions of FIN 48, the Company has classified certain income tax liabilities as current or noncurrent based on
management’s estimate of when these liabilities will be settled. These noncurrent income tax liabilities are recorded in Other long-
term liabilities in the Consolidated Statement of Financial Position. Current liabilities are recorded in Accrued income and other taxes
in the Consolidated Statement of Financial Position.
It is reasonably possible that the liability associated with the Company’s unrecognized tax benefits will increase or decrease within
the next twelve months. These changes may be the result of ongoing audits or the expiration of statutes of limitations. Settlements
could range from $0 to $50 million based on current estimates. Audit outcomes and the timing of audit settlements are subject to
significant uncertainty. Although management believes that adequate provision has been made for such issues, there is the
possibility that the ultimate resolution of such issues could have an adverse effect on the earnings of the Company. Conversely, if
these issues are resolved favorably in the future, the related provision would be reduced, thus having a positive impact on earnings.
It is anticipated that audit settlements will be reached during 2009 in certain foreign jurisdictions that could have a significant
earnings impact. Due to the uncertainty of amounts and in accordance with its accounting policies, the Company has not recorded
any potential impact of these settlements.
The Company files numerous consolidated and separate income tax returns in the U.S. federal jurisdiction and in many state and
foreign jurisdictions. The Company has substantially concluded all U.S. federal income tax matters for years through 2000. The
Company’s U.S. tax matters for the years 2001 through 2007 remain subject to examination by the IRS. Substantially all material
state, local, and foreign income tax matters have been concluded for years through 2000. The Company’s tax matters for the years
2001 through 2007 remain subject to examination by the respective state, local, and foreign tax jurisdiction authorities.
During 2008, the Company received a tax refund from the IRS of $581 million related to the audit of certain claims filed for tax years
1993-1998. The components of this refund and the impact of this refund on the Company’s net (loss) earnings are discussed in more
detail above.
During 2007, the Company reached a settlement with the IRS covering tax years 1999-2000. As a result, the Company recognized a
tax benefit from continuing operations in the United States of $17 million, including interest. Also during 2007, the Company reached
a settlement with the taxing authorities in two locations outside of the U.S. resulting in a tax benefit of $76 million. No other material
settlements were reached during 2007.