Western Union 2009 Annual Report Download - page 114

The Company continues to benefit from an increasing proportion of profits being foreign-derived and
therefore taxed at lower rates than its combined federal and state tax rates in the United States. In addition, in
the second quarter of 2008, the Company implemented additional foreign tax efficient strategies consistent
with its overall tax planning which impacted its effective tax rate for all subsequent periods.
Western Union’s provision for income taxes consisted of the following components (in millions):
2009 2008 2007
Year Ended December 31,
Current:
Federal ................................................. $235.8 $219.6 $284.9
State and local ........................................... 26.0 34.5 25.5
Foreign................................................. 41.8 49.7 50.5
Total current taxes ............................................ 303.6 303.8 360.9
Deferred:
Federal ................................................. (18.5) 15.2 2.8
State and local ........................................... 2.0 (4.2) 0.8
Foreign................................................. (4.4) 4.9 0.6
Total deferred taxes ........................................... (20.9) 15.9 4.2
$282.7 $319.7 $365.1
Deferred tax assets and liabilities are recognized for the expected tax consequences of temporary
differences between the book and tax bases of Western Union’s assets and liabilities. The following table
outlines the principal components of deferred tax items (in millions):
2009 2008
December 31,
Deferred tax assets related to:
Reserves, accrued expenses and employee-related items ....................... $ 91.0 $ 45.4
Pension obligations .................................................. 43.5 39.5
Deferred revenue .................................................... 3.6 3.1
Other............................................................. 10.7 6.8
Total deferred tax assets .................................................. 148.8 94.8
Deferred tax liabilities related to:
Intangibles, property and equipment ...................................... 416.7 349.0
Other............................................................. 1.0 15.9
Total deferred tax liabilities ................................................ 417.7 364.9
Net deferred tax liability .................................................. $268.9 $270.1
Uncertain Tax Positions
The Company has established contingency reserves for material, known tax exposures, including potential
tax audit adjustments with respect to its international operations, which were restructured in 2003. The
Company’s tax reserves reflect management’s judgment as to the resolution of the issues involved if subject to
judicial review. While the Company believes its reserves are adequate to cover reasonably expected tax risks,
there can be no assurance that, in all instances, an issue raised by a tax authority will be resolved at a
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THE WESTERN UNION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)