Thrifty Car Rental 2008 Annual Report Download - page 79

The Company has net operating loss carryforwards available in certain states to offset future state
taxable income. At December 31, 2008, the Company has federal net operating loss carryforwards
of approximately $280.0 million available to offset future taxable income in the U.S., which expire
beginning in 2023 through 2024. A valuation allowance of approximately $0.7 million and $2.8
million existed at December 31, 2008 and 2007, respectively, for state net operating losses. At
December 31, 2008, DTG Canada has net operating loss carryforwards of approximately $40.0
million available to offset future taxable income in Canada, which expire beginning in 2010 through
2028. Valuation allowances have been established for the total estimated future tax effect of the
Canadian net operating losses and other deferred tax assets.
The Company’s effective tax rate differs from the maximum U.S. statutory income tax rate. The
following summary reconciles taxes at the maximum U.S. statutory rate with recorded taxes:
Amount Percent
A
mount Percent Amount Percent
(Amounts in Thousands)
Tax expense computed at the
maximum U.S. statutory rate (159,880)$ 35.0% 4,483$ 35.0% 30,947$ 35.0%
Difference resulting from:
State and local taxes, net of
federal income tax benefit (12,117) 2.7% 3,130 24.4% 2,528 2.9%
Foreign losses 7,701 (1.7%) 3,617 28.2% 1,614 1.8%
Foreign taxes 588 (0.1%) 275 2.2% 1,345 1.5%
Nondeductible impairment 43,749 (9.6%) - 0.0% - 0.0%
Other 3,580 (0.8%) 88 0.7% 295 0.3%
Total (116,379)$ 25.5% 11,593$ 90.5% 36,729$ 41.5%
Year Ended December 31,
2008 2007 2006
Effective January 1, 2007, the Company adopted the provisions of FIN No. 48. Upon adoption of
FIN No. 48 and as of December 31, 2008, the Company had no material liability for unrecognized
tax benefits and no material adjustments to the Company’s opening financial position were required.
There are no material tax positions for which it is reasonably possible that unrecognized tax benefits
will significantly change in the twelve months subsequent to December 31, 2008.
The Company files income tax returns in the U.S. federal and various state, local and foreign
jurisdictions. In the Company’s significant tax jurisdictions, the tax years 2005 through 2007 are
subject to examination by federal taxing authorities and the tax years 2003 through 2007 are subject
to examination by state and foreign taxing authorities.
The Company accrues interest and penalties on underpayment of income taxes related to
unrecognized tax benefits as a component of income tax expense in the consolidated statement of
operations. No amounts were recognized for interest and penalties upon adoption of FIN No. 48 or
during the year ended December 31, 2008.
17. CONCENTRATION OF CREDIT RISK AND FAIR VALUE INFORMATION
Financial instruments which potentially subject the Company to concentrations of credit risk consist
principally of cash and cash equivalents, restricted cash and investments, interest rate swaps,
Chrysler and other vehicle manufacturer receivables and trade receivables. The Company limits its
exposure on cash and cash equivalents and restricted cash and investments by investing in Aaa or
P-1 rated funds and short-term time deposits with a diverse group of high quality financial
institutions. The Company’s exposure relating to interest rate swaps is mitigated by diversifying the
financial instruments among various counterparties, which consist of major financial institutions.
Receivables from Chrysler, the Company's primary vehicle supplier, and other vehicle
manufacturers consist primarily of amounts due under guaranteed residual, buyback, incentive and
promotion programs. The Company’s financial condition and results of operations would be
materially adversely affected if Chrysler or another vehicle manufacturer were unable to meet their
obligations to the Company. Concentrations of credit risk with respect to trade receivables are
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