Lexmark 2014 Annual Report Download - page 106

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The Company has federal, state and foreign net operating loss carryforwards of $10.0 million, $8.2 million and $122.2 million,
respectively. The federal net operating loss carryforwards will expire in the years 2028 to 2034. The state net operating loss
carryforwards expire in the years 2020 to 2027. The foreign net operating loss carryforwards include $44.2 million with no expiration
date. The remainder of the foreign net operating loss carryforwards will expire in the years 2016 to 2024.
The Company has a federal, state and foreign tax credit carryforwards of $0.9 million, $6.8 million and $0.6 million, respectively. The
state tax credit carryforwards are subject to a valuation allowance of $0.6 million. The federal tax credit carryforward will expire in
2034. The state credit carryforward includes $3.7 million with no expiration. The state tax credit carryforward will expire by the year
2023. The foreign credit carryforward will expire in 2019.
Deferred income taxes have not been provided for the undistributed earnings of foreign subsidiaries because such earnings are
indefinitely reinvested. Undistributed earnings of non-U.S. subsidiaries included in the consolidated retained earnings were
approximately $1,753.1 million as of December 31, 2014. It is not practicable to estimate the amount of additional tax that may be
payable on the foreign earnings as there is a significant amount of uncertainty with respect to determining the amount of foreign tax
credits as well as any additional local withholding tax that may arise from the distribution of these earnings. In addition, because such
earnings have been indefinitely reinvested in our foreign operations, repatriation would require liquidation of those investments or a
recapitalization of our foreign subsidiaries, the impact and effects of which are not readily determinable. The Company does not plan
to initiate any action that would precipitate the payment of income taxes.
Tax Positions
The amount of unrecognized tax benefits at December 31, 2014, was $19.2 million, all of which would affect the Company’s effective
tax rate if recognized. The amount of unrecognized tax benefits at December 31, 2013, was $23.5 million, all of which would affect
the Company’s effective tax rate if recognized. The amount of unrecognized tax benefits at December 31, 2012, was $24.2 million, all
of which would affect the Company’s effective tax rate if recognized.
The Company recognizes accrued interest and penalties associated with uncertain tax positions as part of its income tax provision. As
of December 31, 2014, the Company had $1.5 million of accrued interest and penalties. For 2014, the Company recognized in its
statement of earnings a net benefit of $0.2 million for interest and penalties. As of December 31, 2013, the Company had $1.7 million
of accrued interest and penalties. For 2013, the Company recognized in its statement of earnings a net expense of $0.1 million for
interest and penalties. As of December 31, 2012, the Company had $1.7 million of accrued interest and penalties. For 2012, the
Company recognized in its statement of earnings a net benefit of $0.7 million for interest and penalties.
It is reasonably possible that the total amount of unrecognized tax benefits will increase or decrease in the next 12 months. Such
changes could occur based on the expiration of various statutes of limitations or the conclusion of ongoing tax audits in various
jurisdictions around the world. If those events occur within the next 12 months, the Company estimates that its unrecognized tax
benefits amount could decrease by an amount in the range of $1.5 million to $3.5 million, the impact of which would affect the
Company’s effective tax rate.
Several tax years are subject to examination by major tax jurisdictions. In the U.S., federal tax years 2012 and after are subject to
examination. In Switzerland, tax years 2010 and after are subject to examination. In most of the other countries where the Company
files income tax returns, 2009 is the earliest tax year that is subject to examination. The Company believes that adequate amounts have
been provided for any adjustments that may result from those examinations.
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