Office Depot 2012 Annual Report Download - page 34

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Following the recognition of significant valuation allowances in 2009, we have regularly experienced substantial volatility in ou
r
effective tax rate for interim periods. Because deferred income tax benefits cannot be recognized in several jurisdictions, changes in
the amount, mix and timing of projected pre-tax earnings in tax paying jurisdictions can have a significant impact on the annual
expected tax rate which, applied against year-to-date results, can result in significant volatility in the overall effective tax rate. This
interim and full year volatility is likely to continue in future periods until the valuation allowances can be released.
We have reached a tentative settlement with the U.S. Internal Revenue Service (“IRS”) Appeals Division to close the previously-
disclosed IRS deemed royalty assessment relating to 2009 and 2010 foreign operations. The settlement is subject to the Congressional
Joint Committee on Taxation approval which is anticipated in 2013. The resolution of this deemed royalty assessment will close all
known disputes relating to 2009 and 2010. However, pending this approval, the IRS has made a deemed royalty assessment of $12
million ($4.3 million tax-effected) relating to 2011 foreign operations. We disagree with this assessment and believe no UTP accrual
is required at this time.
We file a U.S. federal income tax return and other income tax returns in various states and foreign jurisdictions. The U.S. federal tax
returns for 2011 and 2012 are under review. Significant international tax jurisdictions include the U.K., the Netherlands, France and
Germany. Generally, we are subject to routine examination for years 2008 and forward in these foreign jurisdictions. It is reasonably
possible that some audits will close within the next twelve months which we do not believe would result in a change to our accrued
uncertain tax positions.
Refer to Note F in the Notes to Consolidated Financial Statements for additional tax discussion.
32