Office Depot 2012 Annual Report Download - page 75

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OFFICE DEPOT, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
In addition to the $583.2 million valuation allowance as of December 29, 2012, the Company has an additional $5 million tax effected
net operating loss carryforward assets generated from equity compensation deductions that if realized in future periods would benefit
additional paid-in capital.
The following is a reconciliation of income taxes at the Federal statutory rate to the provision (benefit) for income taxes:
The Company has 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 foreign operations. The settlement is subject to the Congressional
Joint Committee on Taxation approval which is anticipated in 2013. The resolution of this matter will close all known disputes with
the IRS relating to 2009 and 2010. The Company has included the settlement in its assessment of uncertain tax positions at
December 29, 2012, as provided below. Additionally, the 2012 tax rate includes an accrued benefit based on a ruling from the IRS
allowing the Company to amend the 2009 tax year to make certain tax accounting method changes previously reflected in the 2010
tax year and to file an additional claim for refund for the incremental 2009 tax loss. The net result of the tax ruling and the Company’s
settlement with the IRS Appeals Division will result in the receipt of approximately $14 million, which the Company expects to
receive after the Congressional Joint Committee on Taxation review.
The 2012 effective tax rate also includes the benefit from the Recovery of purchase price that is treated as a purchase price adjustment
for tax purposes. As discussed in Note H, this recovery would have been a reduction of related goodwill for financial reporting
purposes, but the related goodwill was impaired in 2008.
The significant tax jurisdictions related to the line item foreign income taxed at rates other than Federal include the UK, the
Netherlands and France.
72
(In thousands) 2012 2011 2010
Federal tax com
p
uted at the statutor
y
rate
$(26,398)
$11,417
$(19,836)
State taxes, net of Federal benefit
709
1,417
1,434
Forei
g
n income taxed at rates other than Federal
(14,889)
(22,29
0
)
(15,926)
Increase (reduction) in valuation allowance
(8,66
2
)
(7,927)
29,777
Non-deductible forei
g
n interest
9,863
11,818
5,094
Chan
g
e in uncertain tax
p
ositions
1,34
2
(77,085)
(32,283)
Tax ex
p
ense from intercom
p
an
y
transactions
1,886
4,955
1,09
0
Sub
p
art F income
—
10,101
—
Chan
g
e in tax rate
1,816
1,529
—
Non-taxable return of
p
urchase
p
rice
(22,361)
—
—
Outside basis difference of forei
g
n
j
oint venture
67,645
—
—
Tax accountin
g
method chan
g
e rulin
g
(15,548)
—
—
Dis
p
osition of forei
g
n affiliates
223
—
(8,562)
Gain on intercom
p
an
y
sale
—
—
20,216
Other items, net
6,071
2,993
8,526
Income tax ex
p
ense (benefit)
$1,69
7
$(63,072)
$(10,47
0
)