MoneyGram 2006 Annual Report Download - page 86

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Table of Contents
MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
$22.9 million and $35.7 million for 2006, 2005 and 2004, respectively. A reconciliation of the expected federal income tax at statutory
rates for year ended to the actual taxes provided is as follows:
(Amounts in thousands) 2006 % 2005 % 2004 %
Income tax at statutory
federal income tax rate $ 61,870 35.0% $ 51,232 35.0% $ 31,157 35.0%
Tax effect of:
State income tax, net of
federal income tax
effect 2,647 1.5% 2,084 1.4% 910 1.0%
Preferred stock
redemption costs — 0.0% — 0.0% 6,004 6.7%
Other 1,445 0.8% (4,673) (3.2%) 1,348 1.5%
65,962 37.3% 48,643 33.2% 39,419 44.3%
Tax-exempt income (13,243) (7.5%) (14,473) (9.9%) (15,528) (17.4%)
Income tax expense $ 52,719 29.8% $ 34,170 23.3% $ 23,891 26.8%
Included in the "Other" component for 2005 is $2.1 million, of tax benefits from the reversal of tax reserves no longer needed due to the
passage of time. In addition, the "Other" component for 2005 includes $3.5 million of tax benefits from changes in estimates to
previously estimated tax amounts resulting from new information received during the year.
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:
(Amounts in thousands) 2006 2005
Deferred tax assets:
Postretirement benefits and other employee
benefits $ 48,587 $ 46,835
Alternative Minimum Tax credits 20,202 30,468
Basis difference in revalued investments 25,502 25,582
Bad debt and other reserves 2,630 5,263
Basis difference in investment income — 6,678
Other 4,285 3,616
Gross deferred tax assets 101,206 118,442
Deferred tax liabilities:
Unrealized gain on securities classified as
available-for-sale (15,083) (23,467)
Depreciation and amortization (59,673) (49,132)
Basis difference in investment income (7,820) —
Unrealized gain on derivative financial
instruments (6,953) (8,366)
Gross deferred tax liabilities (89,529) (80,965)
Net deferred tax asset $ 11,677 $ 37,477
The Company does not consider its earnings in its foreign entities to be permanently reinvested. As of December 31, 2006 and 2005, a
deferred tax liability of $1.9 million and $5.8 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
F-29