MoneyGram 2004 Annual Report Download - page 71

Table of Contents
MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
Deferred income taxes reflect temporary differences between amounts of assets and liabilities for financial reporting purposes and such amounts as measured
by tax laws at enacted tax rates expected to be in effect when such differences reverse. Temporary differences, which give rise to deferred tax assets
(liabilities), at December 31 are:
2004 2003
(Dollars in thousands)
Deferred tax assets:
Postretirement benefits and other employee benefits $ 47,689 $ 41,223
Alternative Minimum Tax credits 34,976 34,464
Unrealized loss on derivative financial investments 22,816 68,072
Basis difference in revalued investments 28,279 24,889
Bad debt and other reserves 2,963 1,997
Other 1,938 3,659
Gross deferred tax assets 138,661 174,304
Deferred tax liabilities:
Unrealized gain on securities classified as available-for-sale (59,489) (67,605)
Depreciation and amortization (42,644) (32,357)
Basis difference in investment income (3,728) (2,537)
State income taxes (959) (1,172)
Gross deferred tax liabilities (106,820) (103,671)
Net deferred tax asset $ 31,841 $ 70,633
The Company does not consider its earnings in its foreign entities to be permanently reinvested. As of December 31, 2004 and 2003, a deferred tax liability of
$4.1 million and $1.0 million was recognized for the unremitted earnings of its foreign entities.
Included in "Employee benefit plans" in the Consolidated Statement of Stockholders' Equity in 2004 is $0.6 million of tax benefits recognized in connection
with the exercise of stock options. Tax benefits recognized in connection with the exercise of stock options were less than $0.1 million in 2003 and 2002.
We have not established a valuation reserve for the deferred tax assets since we believe it is more likely than not that the deferred tax assets will be realized.
Net deferred taxes are included in the Consolidated Balance Sheets in "Other assets."
Prior to the spin off, income taxes were determined on a separate return basis as if MoneyGram had not been eligible to be included in the consolidated
income tax return of Viad and its affiliates. As part of the Distribution, we entered into a Tax Sharing Agreement with Viad which provides for, among other
things, the allocation between MoneyGram and New Viad of federal, state, local and foreign tax liabilities and tax liabilities resulting from the audit or other
adjustment to previously filed tax returns.
The Tax Sharing Agreement provides that through the Distribution Date, the results of MoneyGram and its subsidiaries' operations are included in Viad's
consolidated U.S. federal income tax returns. In general, the Tax Sharing Agreement provides that MoneyGram will be liable for all federal, state, local, and
foreign tax liabilities, including such liabilities resulting from the audit of or other adjustment to previously filed tax returns, that are attributable to the
business of MoneyGram for periods through the Distribution Date, and that Viad will be responsible for all other of these taxes.
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