MoneyGram 2009 Annual Report Download - page 121

Table of Contents
MONEYGRAM INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
2009, 2008 and 2007, 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) 2009 2008 2007
Income tax at statutory federal income tax rate $ (7,813) $ (118,017) $ (347,643)
Tax effect of:
State income tax, net of federal income tax effect 2,051 1,634 3,606
Valuation allowance (16,090) 44,639 434,446
Non-taxable loss on embedded derivatives — 5,611 —
Decrease in tax reserve (2,469) (7,761) —
Other 3,905 (1,186) (152)
(20,416) (75,080) 90,257
Tax-exempt income — (726) (11,776)
Income tax (benefit) expense $ (20,416) $ (75,806) $ 78,481
We had a tax benefit of $20.4 million in 2009, primarily reflecting the release of $17.6 million of valuation allowances on deferred tax
assets. Our pre-tax net loss of $22.3 million, when adjusted for our estimated book to tax differences, results in taxable income, allowing
us to release some valuation allowances on our tax loss carryovers. These book to tax differences include impairments on securities and
other assets and accruals related to separated employees, litigation and unrealized foreign exchange losses. The decrease in tax reserve in
2009 was driven by the favorable settlement or closing of years subject to state audit. Included in "Other" for 2009 is $1.6 million of
expense for the reversal of tax benefits upon the forfeiture of share-based awards and $2.3 million of expense on asset impairments.
Changes in facts and circumstances in the future may cause us to record additional tax benefits as further deferred tax valuation
allowances are released and carry-forwards are utilized. The Company continues to evaluate additional available tax positions related to
the net securities losses.
In 2008, we had a $75.8 million tax benefit, primarily reflecting the recognition of a $90.5 million benefit in the fourth quarter of 2008
upon the completion of an evaluation of the technical merits of tax positions with respect to part of the net securities losses in 2008 and
2007. The $90.5 million benefit relates to the amount of tax carry-back we were able to utilize to recover tax payments made for fiscal
2005 through 2007. We had tax expense of $78.5 million in 2007 on a pre-tax loss of $993.3 million, reflecting the tax treatment of the
$1.2 billion of investment losses incurred in 2007.
Deferred tax assets and liabilities are recorded based on the future tax consequences attributable to temporary differences that exist
between the financial statement carrying value of assets and liabilities and their respective tax basis, and operating loss and tax credit
carry-backs and carry-forwards on a taxing jurisdiction basis. We measure deferred tax assets and liabilities using enacted statutory tax
rates that will apply in the years in which we expect the temporary differences to be recovered or paid. Our ability to realize our deferred
tax assets depends on our ability to generate sufficient taxable income within the carry-back or carry-forward periods provided for in the
tax law. We establish valuation allowances for our deferred tax assets based on a more likely than not threshold. To the extent
management believes that recovery is not likely, a valuation allowance is established in the period in which the
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