Orbitz 2008 Annual Report Download - page 105

ORBITZ WORLDWIDE, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
11. Income Taxes (Continued)
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
Amount
(in millions)
Balance as of January 1, 2007 $ 2
Reductions for tax positions taken during prior years (1)
Additions for tax positions taken during the current year 2
Settlements (1)
Balance as of December 31, 2007 $ 2
The total amount of unrecognized tax benefits that, if recognized, would affect our effective tax rate is $2 million. We do not reasonably expect changes in
the liability for unrecognized tax benefits within the next twelve months.
We recognize interest and penalties related to unrecognized tax benefits in income tax expense. Accrued interest and penalties were almost nil as of
December 31, 2007.
We file income tax returns in the U.S. federal jurisdiction and various state and foreign jurisdictions. A number of years may elapse before an uncertain tax
position, for which we have unrecognized tax benefits, is audited and finally resolved. We adjust these unrecognized tax benefits, as well as the related interest
and penalties, in light of changing facts and circumstances. Settlement of any particular position could require the use of cash. Favorable resolution would be
recognized as a reduction to our effective income tax rate in the period of resolution.
For purposes of FIN 48, with respect to periods prior to the Blackstone Acquisition, we are only required to take into account income tax returns for which
we or one of our subsidiaries is the primary taxpaying entity, namely separate state returns and non-U.S. returns. Uncertain tax positions related to U.S. federal
and state combined and unitary income tax returns filed are only applicable in the post-acquisition accounting period. We and our domestic subsidiaries currently
file a consolidated income tax return for U.S. federal income tax purposes.
The number of years with open tax audits varies depending on the tax jurisdiction. Our major taxing jurisdictions include the U.S. (federal and state), U.K.
and Australia. With limited exceptions, we are no longer subject to U.S. federal, state and local income tax examinations by tax authorities for the years before
2001. We are no longer subject to U.K. federal income tax examinations by the Inland Revenue for years before 2005. We are no longer subject to Australian
federal income tax examinations by the Australian tax authorities for the years before July 1, 2003.
We and, in the predecessor period, Cendant, and in the successor period, Travelport, are subject to income taxes in the U.S. and numerous foreign
jurisdictions. Due to separate and consolidated income tax returns, we are regularly under examination by various tax authorities. Although we believe the
recorded deferred tax assets and liabilities are reasonable, income tax regulations are subject to interpretation and tax litigation is inherently uncertain; therefore,
our assessments can involve both a series of complex judgments about future events and rely heavily on estimates and assumptions. While we believe that the
estimates and assumptions supporting the assessments are reasonable, the final determination of tax examinations and any other related litigation could be
materially different than that which is reflected in historical income tax provisions and recorded deferred tax assets and
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Source: Orbitz Worldwide, In, 10-K/A, August 28, 2008