NetSpend 2015 Annual Report Download - page 32

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Income Taxes
Below is a summary of income tax expense:
Years Ended December 31, Percent Change
(in thousands) 2015 2014 2013 2015 vs. 2014 2014 vs. 2013
Income tax expense ........................ $151,364 129,761 110,981 16.6% 16.9%
Effective income tax rate .................... 30.5% 32.0% 31.5%
The pretax income and the effective income tax rate includes noncontrolling interest in consolidated subsidiaries’
net income and excludes equity in income of equity investments.
During 2015, the Company generated income tax credits in excess of its utilization capacity based on both the
Company’s current operations and with consideration of future tax planning strategies. Based upon these same
considerations, the Company reassessed its need for valuation allowances in all jurisdictions. Accordingly, the
Company experienced a net decrease in its valuation allowance for deferred income tax assets of $0.5 million.
TSYS has adopted the permanent reinvestment exception as allowed by GAAP, with respect to future earnings of
certain foreign subsidiaries. As a result, TSYS considers foreign earnings related to these foreign operations to be
permanently reinvested. No provision for U.S. federal and state incomes taxes has been made in the
Consolidated Financial Statements for those non-U.S. subsidiaries whose earnings are considered to be
reinvested. The amount of undistributed earnings considered to be “reinvested” which may be subject to tax
upon distribution was approximately $83.9 million as of December 31, 2015. Although TSYS does not intend to
repatriate these earnings, a distribution of these non-U.S. earnings in the form of dividends, or otherwise, would
subject the Company to both U.S. federal and state income taxes, as adjusted for non-U.S. tax credits, and
withholding taxes payable to the various non-U.S. countries. Determination of the amount of any unrecognized
deferred income tax liability on these undistributed earnings is not practicable.
In 2015, TSYS reassessed its contingencies for foreign, federal and state exposures, which resulted in a net
increase in tax contingency amounts of approximately $6.4 million.
Refer to Note 15 in the Consolidated Financial Statements for more information on income taxes.
Equity in Income of Equity Investments
Below is a summary of TSYS’ share of income from its interest in equity investments:
Years Ended December 31, Percent Change
(in thousands) 2015 2014 2013 2015 vs. 2014 2014 vs. 2013
Equity in income of equity investments ............ $22,106 17,583 13,047 25.7% 34.8%
The increase in equity income in 2015 and 2014 is the result of organic growth in CUP Data. Refer to Note 12 in
the Consolidated Financial Statements for more information on equity investments.
Discontinued Operations
TSYS sold its Japan-based operations during 2014 and recorded income from discontinued operations, net of
tax, of $1.4 million, $48.7 million and $2.1 million for 2015, 2014 and 2013, respectively. Refer to Note 2 in the
Consolidated Financial Statements for more information on discontinued operations.
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