MoneyGram 2005 Annual Report Download - page 82

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:
2005 2004
(Dollars in thousands)
Deferred tax assets:
Postretirement benefits and other employee benefits $ 46,835 $ 47,689
Alternative Minimum Tax credits 30,468 34,976
Unrealized loss on derivative financial investments — 22,816
Basis difference in revalued investments 25,582 28,279
Bad debt and other reserves 5,263 2,963
Basis difference in investment income 6,678 —
Other 3,616 1,938
Gross deferred tax assets 118,442 138,661
Deferred tax liabilities:
Unrealized gain on securities classified as available-for-sale (23,467) (59,489)
Depreciation and amortization (49,132) (42,644)
Basis difference in investment income — (3,728)
State income taxes — (959)
Unrealized gain on derivative financial instruments (8,366) —
Gross deferred tax liabilities (80,965) (106,820)
Net deferred tax asset $ 37,477 $ 31,841
The Company does not consider its earnings in its foreign entities to be permanently reinvested. As of December 31, 2005 and 2004, a deferred tax liability of
$5.8 million and $4.1 million, respectively, was recognized for the unremitted earnings of its foreign entities. The Company has not established a valuation
reserve for the deferred tax assets since the Company believes it is more likely than not that the deferred tax assets will be realized.
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, the Company 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.
Note 12. Stockholders' Equity
Rights Agreement: In connection with the spin-off, MoneyGram adopted a Rights Agreement ("the Rights Agreement") by and between the Company and
Wells Fargo Bank, N.A., as the Rights Agent. The preferred share purchase rights ("the rights") issuable under the Rights Agreement were attached to the
shares of MoneyGram common stock distributed in the spin-off. In addition, pursuant to the Rights Agreement, one right will be issued with each share of
MoneyGram common stock issued after the spin-off. The rights are inseparable from
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