UPS 2011 Annual Report Download - page 125

UNITED PARCEL SERVICE, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following table summarizes the activity related to our unrecognized tax benefits (in millions):
Tax Interest Penalties
Balance at January 1, 2009 ............................................... $388 $ 97 $ 10
Additions for tax positions of the current year ................................ 41 — —
Additions for tax positions of prior years .................................... 76 27 2
Reductions for tax positions of prior years for:
Changes based on facts and circumstances ............................... (214) (34) (3)
Settlements during the period ......................................... (23) (4) —
Lapses of applicable statute of limitations ............................... (2) — (1)
Balance at December 31, 2009 ............................................ 266 86 8
Additions for tax positions of the current year ................................ 16 — —
Additions for tax positions of prior years .................................... 45 25 2
Reductions for tax positions of prior years for:
Changes based on facts and circumstances ............................... (27) (10) (3)
Settlements during the period ......................................... (6) (3) —
Lapses of applicable statute of limitations ............................... (10) (3) —
Balance at December 31, 2010 ............................................ 284 95 7
Additions for tax positions of the current year ................................ 13 — —
Additions for tax positions of prior years .................................... 17 6 —
Reductions for tax positions of prior years for:
Changes based on facts and circumstances ............................... (50) (9) (2)
Settlements during the period ......................................... (11) (19) (1)
Lapses of applicable statute of limitations ............................... (1) — (1)
Balance at December 31, 2011 ............................................ $252 $ 73 $ 3
The total amount of gross unrecognized tax benefits as of December 31, 2011, 2010 and 2009 that, if
recognized, would affect the effective tax rate was $247, $283 and $243 million, respectively. We also had gross
recognized tax benefits of $291, $326 and $329 million recorded as of December 31, 2011, 2010 and 2009,
respectively, associated with outstanding refund claims for prior tax years. Therefore, we had a net receivable
recorded with respect to prior years’ income tax matters in the accompanying consolidated balance sheets.
Additionally, we have recognized a receivable for interest of $27, $32 and $56 million for the recognized tax
benefits associated with outstanding refund claims as of December 31, 2011, 2010 and 2009, respectively. Our
continuing practice is to recognize interest and penalties associated with income tax matters as a component of
income tax expense.
We file income tax returns in the U.S. federal jurisdiction, most U.S. state and local jurisdictions, and many
non-U.S. jurisdictions. We have substantially resolved all U.S. federal income tax matters for tax years prior to
2005. During the fourth quarter of 2010, we received a refund of $139 million as a result of the resolution of tax
years 2003 through 2004 with the IRS Appeals Office. We have filed all required U.S. state and local returns
reporting the result of the resolution of the U.S. federal income tax audit of the tax years 2003 and 2004. A
limited number of U.S. state and local matters are the subject of ongoing audits, administrative appeals or
litigation.
A number of years may elapse before an uncertain tax position is audited and ultimately settled. It is
difficult to predict the ultimate outcome or the timing of resolution for uncertain tax positions. It is reasonably
possible that the amount of unrecognized tax benefits could significantly increase or decrease within the next
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