Starwood 2010 Annual Report Download - page 145

Pursuant to ASC 740, Income Taxes, the Company is required to accrue tax and associated interest and penalty
on uncertain tax positions. The Company recorded charges of $23 million, $9 million and $0 million, for the years
ended December 31, 2010, 2009, and 2008, respectively, primarily associated with interest due on existing
uncertain tax positions.
When the Company sells a wholly-owned hotel subject to a long-term management contract, the pretax gain is
deferred and is recognized over the life of the contract. In such instances, the Company establishes a deferred tax
asset on the deferred gain and recognizes the related tax benefit through the tax provision. The Company recorded
benefits of $7 million, $3 million and $10 million, for the years ended December 31, 2010, 2009, and 2008,
respectively, to establish the deferred tax assets on these types of dispositions.
During 2010 and 2008, the Company completed certain transactions that generated capital gains for U.S. tax
purposes. These gains were offset by capital losses upon which the Company had not previously accrued a benefit
since the realization was determined to be unlikely. Therefore, during 2010 and 2008, the Company recorded tax
benefits of $99 million and $31 million, respectively, to reverse the capital loss valuation allowance.
As of December 31, 2010, the Company had approximately $510 million of total unrecognized tax benefits, of
which $37 million would affect its effective tax rate if recognized. It is reasonably possible that zero to substantially
all of the Company’s unrecognized tax benefits as of December 31, 2010 will reverse within the next twelve months.
A reconciliation of the beginning and ending balance of unrecognized tax benefits is as follows (in millions):
2010 2009 2008
Year Ended December 31,
Beginning of Year ........................................ $999 $1,003 $ 968
Additions based on tax positions related to the current year ........ 29 4 41
Additions for tax positions of prior years ...................... 18 2 2
Settlements with tax authorities ............................. (499) (7) (3)
Reductions for tax positions in prior years ..................... (5) (1) (4)
Reductions due to the lapse of applicable statutes of limitations ..... (32) (2) (1)
EndofYear............................................. $510 $ 999 $1,003
The Company recognizes interest and penalties related to unrecognized tax benefits through income tax
expense. The Company had $92 million and $233 million accrued for the payment of interest and no accrued
penalties as of December 31, 2010 and December 31, 2009, respectively.
The Company is subject to taxation in the U.S. federal jurisdiction, as well as various state and foreign
jurisdictions. As of December 31, 2010, the Company is no longer subject to examination by U.S. federal taxing
authorities for years prior to 2004 and to examination by any U.S. state taxing authority prior to 1998. All
subsequent periods remain eligible for examination. In the significant foreign jurisdictions in which the Company
operates, the Company is no longer subject to examination by the relevant taxing authorities for any years prior to
2001.
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STARWOOD HOTELS & RESORTS WORLDWIDE, INC.
NOTES TO FINANCIAL STATEMENTS — (Continued)