Pitney Bowes 2008 Annual Report Download - page 80

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PITNEY BOWES INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Tabular dollars in thousands, except per share data)
61
The components of our deferred tax liabilities and assets are as follows:
December 31,
2008 2007
Deferred tax liabilities:
Depreciation $ 67,835 $ 44,125
Deferred profit (for tax purposes) on
sales to finance subsidiaries 393,603 486,107
Lease revenue and related depreciation 342,604 296,527
Pension - 76,830
Amortizable intangibles 61,866 45,311
Other 81,717 77,239
Deferred tax liabilities 947,625 1,026,139
Deferred tax (assets):
Nonpension postretirement benefits (133,484) (141,205)
Pension (136,673) -
Inventory and equipment capitalization (21,778) (22,651)
Restructuring charges (42,938) (93,113)
Long-term incentives (59,447) (60,571)
Net operating loss and tax credit carry forwards (103,753) (91,513)
Other (204,426) (168,785)
Valuation allowance 69,047 69,792
Deferred tax (assets) (633,452) (508,046)
Net deferred taxes 314,173 518,093
Less amounts included in current and
non-current income taxes 59,820 62,719
Deferred taxes on income $ 254,353 $ 455,374
As of December 31, 2008 and 2007, approximately $246.7 million and $243.7 million, respectively, of net operating loss carry
forwards were available to us. Most of these losses can be carried forward indefinitely.
It has not been necessary to provide for income taxes on $710 million of cumulative undistributed earnings of subsidiaries outside the
U.S. These earnings will be either indefinitely reinvested or remitted substantially free of additional tax. Determination of the
liability that would result in the event all of these earnings were remitted to the U.S. is not practicable. It is estimated, however, that
withholding taxes on such remittances would approximate $15 million.
In June 2006, the FASB issued FIN No. 48, Accounting for Uncertainty in Income Taxes, which supplements SFAS No. 109,
Accounting for Income Taxes, by defining the confidence level that a tax position must meet in order to be recognized in the financial
statements. FIN No. 48 requires a two-step approach under which the tax effect of a position is recognized only if it is “more-likely-
than-not” to be sustained and the amount of tax benefit recognized is equal to the largest tax benefit that is greater than 50 percent
likely of being realized upon ultimate settlement of the tax position. This is a different standard for recognition than the approach
previously required. Both approaches require us to exercise considerable judgment and estimates are inherent in both processes. We
adopted the provisions of FIN No. 48 on January 1, 2007. As a result, on initial adoption we recognized an $84.4 million increase in
our liability for uncertain tax positions and a corresponding reduction to our opening retained earnings. The total amount of
unrecognized tax benefits at December 31, 2008 and 2007 were $434.2 million and $398.9 million, respectively, of which $370.9
million and $335.7 million, respectively, would affect the effective tax rate if recognized. A reconciliation of the amount of
unrecognized tax benefits at the beginning and end of 2008 and 2007 is as follows: