Western Union 2010 Annual Report Download - page 104

in the Consolidated Balance Sheets. A reconciliation of the beginning and ending amount of unrecognized tax
benefits, excluding interest and penalties, is as follows (in millions):
2010 2009
Balance at January 1, ............................................................................................... $ 477.2 $ 361.2
Increases—positions taken in current period (a) ......................................................... 134.1 124.3
Increases—positions taken in prior periods (b) ........................................................... 33.4 0.4
Decreases—positions taken in prior periods ............................................................... (21.8) —
Decreases—settlements with taxing authorities .......................................................... (0.8) (4.4)
Decreases—lapse of applicable statute of limitations .................................................. (3.4) (4.3)
Balance at December 31, .......................................................................................... $ 618.7 $ 477.2
(a) Includes recurring accruals for issues which initially arose in previous periods.
(b) Changes to positions taken in prior periods relate to changes in estimates used to calculate prior period
unrecognized tax benefits.
In the first quarter of 2010, the Company made a $250 million refundable tax deposit relating to potential United
States federal tax liabilities, including those arising from the Company’s 2003 international restructuring, which
have been previously accrued in the Company’s financial statements. The deposit was recorded as a reduction to
“Income taxes payable” in the Consolidated Balance Sheets and a decrease in cash flows from operating activities in
the Consolidated Statement of Cash Flows. Making the deposit limits the further accrual of interest charges with
respect to such potential tax liabilities, to the extent of the deposit.
A substantial portion of the Company’s unrecognized tax benefits relate to the 2003 restructuring of the
Company’s international operations whereby the Company’s income from certain foreign-to-foreign money transfer
transactions has been taxed at relatively low foreign tax rates compared to the Company’s combined federal and
state tax rates in the United States. The total amount of unrecognized tax benefits that, if recognized, would affect
the effective tax rate was $555.5 million and $468.6 million as of December 31, 2010 and 2009, respectively,
excluding interest and penalties.
The Company recognizes interest and penalties with respect to unrecognized tax benefits in “Provision for
income taxes” in its Consolidated Statements of Income, and records the associated liability in “Income taxes
payable” in its Consolidated Balance Sheets. The Company recognized $6.9 million, $11.0 million and
$11.6 million in interest and penalties during the years ended December 31, 2010, 2009 and 2008,
respectively. The Company has accrued $52.4 million and $45.5 million for the payment of interest and
penalties at December 31, 2010 and 2009, respectively.
Subject to the matter referenced in the paragraph below, the Company has identified no other uncertain tax
positions for which it is reasonably possible that the total amount of unrecognized tax benefits will significantly
increase or decrease within 12 months, except for recurring accruals on existing uncertain tax positions. The change
in unrecognized tax benefits during the years ended December 31, 2010 and 2009 is substantially attributable to
such recurring accruals.
The Company and its subsidiaries file tax returns for the United States, for multiple states and localities, and for
various non-United States jurisdictions, and the Company has identified the United States and Ireland as its two
major tax jurisdictions. The United States federal income tax returns of First Data, which include the Company, are
eligible to be examined for the years 2002 through 2006. The Company’s United States federal income tax returns
since the Spin-off are also eligible to be examined. In the second quarter of 2010, the IRS, First Data and the
Company reached a resolution of all outstanding issues related to First Data’s United States federal consolidated
income tax return for 2002 (which included issues related to the Company). The resolution did not result in a
material change to the Company’s financial position. In addition, the IRS completed its examination of the United
States federal consolidated income tax returns of First Data for 2003 and 2004, which included the Company, and
issued a Notice of Deficiency in December 2008. The Notice of Deficiency alleges significant additional taxes,
interest and penalties owed with respect to a variety of adjustments involving the Company and its subsidiaries, and
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