Western Union 2013 Annual Report Download - page 228

2013 FORM 10-K
THE WESTERN UNION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
118
The increase in the Company's effective tax rate for the year ended December 31, 2013 compared to 2012 is primarily due to
the combined effect of various discrete items, partially offset by an increasing proportion of profits that were foreign-derived in
2013, and generally taxed at lower rates than the Company's combined federal and state tax rates in the United States. The increase
in the Company's effective tax rate for the year ended December 31, 2012 compared to 2011 is primarily due to the impact of the
IRS Agreement, discussed above, which resulted in a tax benefit of $204.7 million related to the adjustment of reserves associated
with this matter during 2011, partially offset by benefits from favorable tax settlements in 2012 and higher taxes associated with
the Finint and Costa remeasurement gains during 2011 (see Note 4). The Company continues to benefit from a significant proportion
of its profits being foreign-derived, and generally taxed at lower rates than its combined federal and state tax rates in the United
States. 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,
2013 2012 2011
Current:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 86.1 $ 117.2 $ 36.2
State and local. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8.1 (2.5) 0.6
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73.6 63.4 51.2
Total current taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167.8 178.1 88.0
Deferred:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2.2 (24.7) 41.9
State and local. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (11.8)(12.3) 3.9
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (29.7) 1.8 (24.6)
Total deferred taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (39.3)(35.2) 21.2
$ 128.5 $ 142.9 $ 109.2
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,
2013 2012
Deferred tax assets related to:
Reserves, accrued expenses and employee-related items . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 57.0 $ 65.7
Pension obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25.6 36.7
Tax attribute carryovers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22.3 14.7
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26.6 25.3
Valuation allowance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (16.4)(13.0)
Total deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 115.1 129.4
Deferred tax liabilities related to:
Intangibles, property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 434.3 481.5
Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 434.3 481.5
Net deferred tax liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 319.2 $ 352.1
The valuation allowance relates primarily to the Company's ability to recognize tax benefits associated with certain foreign
net operating losses, which are included in "Tax attribute carryovers" in the table above. The recognition of these benefits is
dependent upon the future taxable income in such foreign jurisdictions.