Metro PCS 2009 Annual Report Download - page 144

MetroPCS Communications, Inc. and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 2009, 2008 and 2007
F-30
Therefore, the Company has recorded a valuation allowance of $47.2 million and $47.7 million as of December 31,
2009 and 2008, respectively.
Audits and Uncertain Tax Benefits
The Company files income tax returns in the U.S. federal and certain state jurisdictions and is subject to
examinations by the Internal Revenue Service (the “IRS”) and other taxing authorities. These audits can result in
adjustments of taxes due or adjustments of the net operating losses which are available to offset future taxable
income. The Company’s estimate of the potential outcome of any uncertain tax issue prior to audit is subject to
management’s assessment of relevant risks, facts, and circumstances existing at that time. An unfavorable result
under audit may reduce the amount of federal and state net operating losses the Company has available for
carryforward to offset future taxable income, or may increase the amount of tax due for the period under audit,
resulting in an increase to the effective rate in the year of resolution.
A reconciliation of the beginning and ending amount of gross unrecognized tax benefits are as follows (in
thousands):
2009 2008 2007
Balance at beginning of period............................................................................... $ 19,328 $ 19,328 $ 19,328
Increases for tax provisions taken during a prior period.........................................
Increases for tax provisions taken during the current period .................................. — — —
Decreases relating to settlements............................................................................ — — —
Decreases resulting from the expiration of the statute of limitations...................... (13,244) — —
Balance at end of period ......................................................................................... $ 6,084$ 19,328 $ 19,328
The net amount of unrecognized tax positions that, if recognized, would affect the effective tax rate is $4.0
million and $12.6 million as of December 31, 2009 and 2008, respectively. Additionally, the net interest and
penalties which would affect the effective tax rate is $5.0 million and $13.6 million as of December 31, 2009 and
2008, respectively. The Company continues to recognize both interest and penalties related to unrecognized tax
benefits as a component of income tax expense. The Company recognized gross interest and penalties of $0.8
million, $2.5 million and $2.8 million during the years ended 2009, 2008 and 2007, respectively. Accrued gross
interest and penalties were $6.5 million and $18.3 million as of December 31, 2009 and 2008, respectively. A state
examination is currently ongoing and the Company believes it is reasonably possible that the amount of
unrecognized tax benefits could significantly decrease within the next 12 month period. The Company does not
anticipate that a proposed adjustment would result in a material change to the Company’s financial position. The
gross unrecognized tax benefits could change due to settlement with this state in an amount up to $2.8 million.
The IRS is currently examining the 2005 and 2006 tax years of Royal Street Communications. Management
does not believe the examination will have a significant effect on the Company’s tax position.
In addition, there is a state income tax examination currently in progress for the Company and/or certain of its
subsidiaries for various tax years. Management does not believe this examination will have a significant effect on
the Company’s tax position.