Saks Fifth Avenue 2008 Annual Report Download - page 75

SAKS INCORPORATED & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(In thousands, except per share amounts)
tax returns related to prior periods. During 2006, the Company favorably concluded certain tax examinations
which resulted in an income tax benefit of $10,150. The Company analyzed its positions related to the reserve for
tax exposures and determined that the amount was adequate. The Company will continue to analyze its positions
related to the reserve for tax exposures on an ongoing basis.
The Company made income tax payments, net of refunds received of $(10,214), $(17,492) and, $34,222
during 2008, 2007, and 2006, respectively.
As a result of the implementation of FIN No. 48, the Company recorded a $33,671 decrease in the liability
for unrecognized tax benefits which was accounted for as an increase to the beginning shareholder’s equity. A
reconciliation of the beginning and ending amount of gross unrecognized tax benefits follows:
January 31,
2009
February 2,
2008
Unrecognized tax benefits at beginning of year ................................. $47,648 $46,278
Gross amount of increases for tax positions of prior years ........................ 505 1,793
Gross amount of decreases for tax positions of prior years ........................ (761) —
Gross amount of decreases due to statute expirations ............................ (1,256) (423)
Gross amount of decreases due to tax settlements ............................... (105) —
Balance at end of year ..................................................... $46,031 $47,648
Including the cumulative effect decrease, at the beginning and ending of 2008 the Company had $44,646
and $45,339 (net of federal and state benefits) of total unrecognized tax benefits, respectively. Of these totals,
$13,264 and $13,958 (net of federal and state benefits) represents the amounts of unrecognized tax benefits that,
if recognized, would affect the effective income tax rate in future periods. It is reasonably possible that the
amount of unrecognized tax benefits will increase or decrease in the next twelve months as a result of settling
uncertain tax positions. However, the Company does not anticipate this to result in any material changes to the
amount of unrecognized tax benefits.
The Company recognizes interest accrued related to unrecognized tax benefits and penalties in income tax
expense. During the years ended January 31, 2009 and February 2, 2008, the Company recognized $1,688 and
$377, respectively. in interest and penalties. The Company had $4,918 and $3,230 for the payment of interest and
penalties accrued as of January 31, 2009 and February 2, 2008, respectively.
The Company files a consolidated U.S. Federal income tax return as well as state tax returns in multiple
state jurisdictions. The Company has completed examinations by the Internal Revenue Service for taxable years
through January 29, 2005 with no significant adjustments. With respect to the state and local jurisdictions, the
Company has completed examinations in many jurisdictions through the same period and beyond and currently
has examinations in progress for several jurisdictions.
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