The Hartford 2008 Annual Report Download - page 446

Table of Contents
THE HARTFORD FINANCIAL SERVICES GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
13. Income Tax (continued)
The Company or one of its subsidiaries files income tax returns in the U.S. federal jurisdiction, and various states and
foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S. federal, state and local, or non-U.S.
income tax examinations by tax authorities for years before 2004. During 2008, the Internal Revenue Service (“IRS”)
completed its examination of the Company’s U.S. income tax returns for 2002 through 2003. The Company received
notification of the approval by the Joint Committee on Taxation of the results of the examination subsequent to
December 31, 2008. The examination will not have a material effect on the Company’s net income or financial position. The
2004 through 2006 examination began during 2008, and is expected to close by the end of 2010. In addition, the Company is
working with the IRS on a possible settlement of an issue related to prior periods which if settled, may result in the booking
of tax benefits in 2009. Such benefits are not expected to be material to the Company’s net income or financial position. The
Company does not anticipate that any of these items will result in a significant change in the balance of unrecognized tax
benefits within 12 months.
The Company adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income Taxes, on
January 1, 2007. As a result of the adoption, the Company recognized a $12 decrease in the liability for unrecognized tax
benefits and a corresponding increase in the January 1, 2007 balance of retained earnings. A reconciliation of the beginning
and ending amount of unrecognized tax benefits is as follows:
For the years ended December 31,
2008 2007
Balance, at January 1 $ 76 $ 8
Additions based on tax positions related to the current year 27 33
Additions for tax positions for prior years –– 35
Reductions for tax positions for prior years 12 ––
Settlements –– ––
Balance, at December 31 $ 91 $ 76
The entire balance, if it were recognized, would affect the effective tax rate.
The Company classifies interest and penalties (if applicable) as income tax expense in the financial statements. During the
years ended December 31, 2008, 2007 and 2006, the Company recognized approximately $0, $1, and ($6) in interest
expense (income). The Company had approximately $1 and $1 of interest accrued at December 31, 2008 and 2007,
respectively. The Company does not believe it would be subject to any penalties in any open tax years and, therefore, has
not booked any accrual for penalties.
A reconciliation of the tax provision at the U.S. Federal statutory rate to the provision for income taxes is as follows:
For the years ended December 31,
2008 2007 2006
Tax provision at U.S. Federal statutory rate $ (1,607) $ 1,402 $ 1,261
Tax-exempt interest (161) (157) (153)
Dividends received deduction, net (191) (170) (186)
Sale of Omni Insurance Group, Inc. –– — (40)
Goodwill 113 –– ––
Other 4 (19) (25)
Provision for income taxes $ (1,842) $ 1,056 $ 857
F-76
Source: HARTFORD FINANCIAL S, 10-K, February 12, 2009