Western Union 2012 Annual Report Download - page 115

THE WESTERN UNION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
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Service (“IRS”) of certain issues relating to the 2002-2004 tax years. The Company continues to benefit from a significant proportion
of its profits being foreign-derived, and therefore taxed at lower rates than its combined federal and state tax rates in the United
States. However, certain portions of the Company's foreign source income are subject to United States federal and state income
tax as earned due to the nature of the income, and dividend repatriations of the Company's foreign source income are generally
subject to United States federal and state income tax.
The Company's provision for income taxes consisted of the following components (in millions):
Year Ended December 31,
2012 2011 2010
Current:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 117.2 $ 36.2 $ 103.6
State and local. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (2.5) 0.6 30.1
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 63.4 51.2 73.0
Total current taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 178.1 88.0 206.7
Deferred:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (24.7) 41.9 28.6
State and local. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (12.3) 3.9 9.7
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1.8 (24.6)(9.7)
Total deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (35.2) 21.2 28.6
$ 142.9 $ 109.2 $ 235.3
Deferred tax assets and liabilities are recognized for the expected tax consequences of temporary differences between the
book and tax bases of the Company's assets and liabilities. The following table outlines the principal components of deferred tax
items (in millions):
December 31,
2012 2011
Deferred tax assets related to:
Reserves, accrued expenses and employee-related items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 65.7 $ 40.6
Pension obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36.7 40.0
Tax attribute carryovers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4.2 11.9
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.8 20.6
Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 129.4 113.1
Deferred tax liabilities related to:
Intangibles, property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 481.5 502.8
Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 481.5 502.8
Net deferred tax liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 352.1 $ 389.7
Uncertain Tax Positions
The Company has established contingency reserves for a variety of material, known tax exposures. As of December 31, 2012,
the total amount of tax contingency reserves was $111.9 million, including accrued interest and penalties, net of related benefits.
The Company's tax reserves reflect management's judgment as to the resolution of the issues involved if subject to judicial review
or other settlement. 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 financial cost that does not exceed its related
reserve. With respect to these reserves, the Company's income tax expense would include (i) any changes in tax reserves arising
from material changes during the period in the facts and circumstances (i.e., new information) surrounding a tax issue and (ii) any
difference from the Company's tax position as recorded in the financial statements and the final resolution of a tax issue during
the period. Such resolution could materially increase or decrease income tax expense in the Company's consolidated financial
statements in future periods and could impact operating cash flows.