OfficeMax 2014 Annual Report Download - page 96

Table of Contents
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develops in certain foreign jurisdictions, the Company may release all or a portion of the remaining valuation allowances in these jurisdictions as early as the
first half of 2015. The Company will continue to assess the realizability of its deferred tax assets in the U.S. and remaining foreign jurisdictions.
The following table summarizes the activity related to unrecognized tax benefits:
(In millions)  2013 2012
Beginning balance  $ 5 $ 7
Increase related to current year tax positions   4 —
Increase related to prior year tax positions   — 3
Decrease related to prior year tax positions   — (1)
Decrease related to lapse of statute of limitations   — —
Decrease related to settlements with taxing authorities   — (4)
Increase related to the Merger   6 —
Ending balance  $15 $ 5
Due to settlements with certain tax authorities in 2014, the Company’s balance of unrecognized tax benefits decreased by $3 million, which resulted in an
income tax benefit of $2 million. Included in the balance of $23 million at December 27, 2014, are $7 million of unrecognized tax benefits that, if
recognized, would affect the effective tax rate. The difference of $16 million primarily results from tax positions which if sustained would be offset by
changes in valuation allowance. It is reasonably possible that certain tax positions will be resolved within the next 12 months, which the Company does not
believe would result in a material change in its unrecognized tax benefits. Additionally, the Company anticipates that it is reasonably possible that new
issues will be raised or resolved by tax authorities that may require changes to the balance of unrecognized tax benefits; however, an estimate of such
changes cannot reasonably be made.
The Company recognizes interest related to unrecognized tax benefits in interest expense and penalties in the provision for income taxes. The Company
recognized a net interest and penalty benefit of $9 million in 2014 due to settlements reached with certain taxing authorities. The Company recognized
interest and penalty expense of $1 million and $2 million in 2013 and 2012, respectively. The Company had approximately $1 million accrued for the
payment of interest and penalties as of December 27, 2014, which is not included in the table above.
The Company files a U.S. federal income tax return and other income tax returns in various states and foreign jurisdictions. With few exceptions, the
Company is no longer subject to U.S. federal and state and local income tax examinations for years before 2013 and 2009, respectively. The acquired
OfficeMax U.S. consolidated group is no longer subject to U.S. federal and state and local income tax examinations for years before 2010 and 2006,
respectively. The U.S. federal income tax return for 2013 is under concurrent year review. Generally, the Company is subject to routine examination for years
2008 and forward in its international tax jurisdictions.
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The Company leases retail stores and other facilities, vehicles, and equipment under operating lease agreements. Facility leases typically are for a fixed non-
cancellable term with one or more renewal options. In addition to minimum rentals, the Company is required to pay certain executory costs such as real estate
taxes, insurance and common area maintenance on most of the facility leases. Many lease agreements contain tenant improvement allowances, rent holidays,
and/or rent escalation clauses. Certain leases contain provisions for additional rent to be paid if sales exceed a specified amount, though such payments have
been immaterial during the years presented.
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