Time Warner Cable 2010 Annual Report Download - page 119

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Uncertain Income Tax Positions
The Company recognizes income tax benefits for those income tax positions determined more likely than not to be
sustained upon examination, based on the technical merits of the positions. The reserve for uncertain income tax positions
is included in other liabilities in the consolidated balance sheet. Changes in the Company’s reserve for uncertain income
tax positions, excluding the related accrual for interest and penalties, from January 1 through December 31 are presented
below (in millions):
2010 2009 2008
Balance at beginning of year ................................ $ 56 $ 22 $ 18
Additions for prior year tax positions .......................... 2 32 3
Additions for current year tax positions ........................ 6 3 5
Reductions for prior year tax positions ......................... — — (2)
Lapses in statute of limitations ............................... (13) (1) (2)
Balance at end of year ..................................... $ 51 $ 56 $ 22
If the Company were to recognize the benefits of these uncertain income tax positions, $29 million, $28 million and
$19 million, net of the federal and state benefit for income taxes, would have impacted income tax (benefit) provision in
the consolidated statement of operations and the effective tax rate for the years ended December 31, 2010, 2009 and 2008,
respectively.
The impact of temporary differences and tax attributes are considered when calculating accruals for interest and
penalties associated with the reserve for uncertain income tax positions. The amount accrued for interest and penalties as
of December 31, 2010 and 2009 was $15 million and $17 million, respectively. The Company recognizes interest and
penalties accrued on uncertain income tax positions as part of the income tax (benefit) provision. The income tax (benefit)
provision for the years ended December 31, 2010, 2009 and 2008 includes interest and penalties of $2 million, $13 million
and $2 million, respectively.
The Company does not currently anticipate that its existing reserves related to uncertain income tax positions as of
December 31, 2010 will significantly increase or decrease during the twelve-month period ending December 31, 2011;
however, various events could cause the Company’s current expectations to change in the future.
In August 2009, the Internal Revenue Service (“IRS”) examination of the Company’s income tax returns for the
period 2002 to 2004 was settled, with the exception of an immaterial item subject to an ongoing examination. The
resolution of these items did not have a material impact on the Company’s consolidated financial position or results of
operations. The IRS is currently examining the Company’s 2005 to 2007 income tax returns. The Company does not
anticipate that this examination will have a material impact on the Company’s consolidated financial position or results of
operations. In addition, the Company is also subject to ongoing examinations of the Company’s tax returns by state and
local tax authorities for various periods. Activity related to these state and local examinations did not have a material
impact on the Company’s consolidated financial position or results of operations in 2010, nor does the Company
anticipate a material impact in the future.
107
TIME WARNER CABLE INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)