Unum 2014 Annual Report Download - page 135

UNUM • 2014 ANNUAL REPORT 133
Included in the balances at December 31, 2014, 2013, and 2012 are $10.4 million, $10.2 million, and $15.0 million, respectively,
of unrecognized tax benefits for tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about
the timing of such deductibility. Other than potential interest and penalties, the disallowance of the shorter deductibility period would
not affect our results of operations but would accelerate the payment of cash to the taxing authority.
We recognize interest expense and penalties, if applicable, related to unrecognized tax benefits in tax expense net of federal income
tax. We recognized an increase (reduction) in interest expense related to unrecognized tax benefits of $0.2 million, $(1.1) million, and
$(10.4) million during 2014, 2013, and 2012, respectively. The total amounts of accrued interest and penalties related to unrecognized
tax benefits in our consolidated balance sheets as of December 31, 2014 and 2013 were $1.0 million and $0.8 million, respectively. It is
reasonably possible that unrecognized tax benefits could decrease within the next 12 months by up to $19.3 million as a result of resolution
of audit activity with the Internal Revenue Service (IRS).
We file federal and state income tax returns in the United States and in foreign jurisdictions. We are under continuous examination
by the IRS with regard to our U.S. federal income tax returns. During 2013, our appeal of tax years 2005 and 2006 was effectively settled
with the approval of the Congressional Joint Committee on Taxation. As a result of the settlement, we received a cash refund of taxes
and interest of $17.5 million in 2014.
During 2012, the IRS audit of our 2009 and 2010 years commenced, and we also finalized all issues with the IRS related to our 2007
and 2008 years, resulting in a reduction of our federal income taxes of $11.0 million. In the first quarter of 2015, we reached a tentative
settlement of our 2009 and 2010 tax years with the IRS and expect to finalize the settlement of these years in 2015. As part of the
settlement with the IRS of the 2009 and 2010 tax years, we also resolved claims for refund we filed related to tax credits for years 2003
through 2012 and expect to record an immaterial increase in net income during 2015.
Tax years subsequent to 2008 remain subject to examination by tax authorities in the U.S., and tax years subsequent to 2012 remain
subject to examination in major foreign jurisdictions. We believe sufficient provision has been made for all potential adjustments for years
that are not closed by the statute of limitations in all major tax jurisdictions and that any such adjustments would not have a material
adverse effect on our financial position, liquidity, or results of operations.
In January 2013, the American Taxpayer Relief Act retroactively reinstated the active financing income exemption to the beginning
of 2012 which affects the amount of earnings from foreign subsidiaries that is taxed annually, regardless of whether foreign earnings are
repatriated. Our 2012 income tax expense reflected the taxation of all active financing income from our foreign subsidiaries as required
under the law in place prior to the reinstatement. In 2013, we reversed the amounts recorded in 2012 and recorded a reduction in income
tax expense of $0.9 million to reflect the reinstatement of the exemption of active financing income. The active financing income
exemption expired again for tax years beginning on or after January 1, 2015, the effect of which is expected to be immaterial in 2015.
As of December 31, 2014 and 2013, we had no net operating loss carryforward for U.S. income taxes. We record a valuation allowance
to reduce deferred tax assets to the amount that is more likely than not to be realized. As of December 31, 2014 and 2013, we had no
valuation allowance.
Total income taxes paid net of refunds during 2014, 2013, and 2012 were $155.7 million, $398.1 million, and $185.0 million, respectively.