Western Union 2013 Annual Report Download - page 230

2013 FORM 10-K
THE WESTERN UNION COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
120
The United States Internal Revenue Service ("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. In December 2011, the Company reached an agreement with the IRS resolving substantially all of the issues related to the
Company's restructuring of its international operations in 2003. As a result of the IRS Agreement, the Company expects to make
cash payments of approximately $190 million, plus additional accrued interest, of which $92.4 million have been made as of
December 31, 2013. These payments were made during 2012. The Company expects to pay the remaining amount in 2014 and
beyond. The IRS completed its examination of the United States federal consolidated income tax returns of First Data, which
include the Company's 2005 and pre-Spin-off 2006 taxable periods and issued its report on October 31, 2012 ("FDC 30-Day
Letter"). Furthermore, the IRS completed its examination of the Company's United States federal consolidated income tax returns
for the 2006 post-Spin-off period through 2009 and issued its report also on October 31, 2012 ("WU 30-Day Letter"). Both the
FDC 30-Day Letter and the WU 30-Day Letter propose tax adjustments affecting the Company, some of which are agreed and
some of which are unagreed. Both First Data and the Company filed their respective protests with the IRS Appeals Division on
November 28, 2012 related to the unagreed proposed adjustments. The Company believes its reserves are adequate with respect
to both the agreed and unagreed adjustments.
As of December 31, 2013, no provision had been made for United States federal and state income taxes on certain of the
Company's outside tax basis differences, which primarily relate to accumulated foreign earnings of approximately $5.0 billion,
which have been reinvested and are expected to continue to be reinvested outside the United States indefinitely. Upon distribution
of those earnings to the United States in the form of actual or constructive dividends, the Company would be subject to United
States income taxes (subject to an adjustment for foreign tax credits), state income taxes and possible withholding taxes payable
to various foreign countries. Such taxes could be significant. Determination of this amount of unrecognized United States deferred
tax liability is not practicable because of the complexities associated with its hypothetical calculation.
Tax Allocation Agreement with First Data
The Company and First Data each are liable for taxes imposed on their respective businesses both prior to and after the Spin-
off. If such taxes have not been appropriately apportioned between First Data and the Company, subsequent adjustments may occur
that may impact the Company's financial condition or results of operations.
Also under the tax allocation agreement, with respect to taxes and other liabilities that result from a final determination that
is inconsistent with the anticipated tax consequences of the Spin-off (as set forth in the private letter ruling and relevant tax opinion)
("Spin-off Related Taxes"), the Company will be liable to First Data for any such Spin-off Related Taxes attributable solely to
actions taken by or with respect to the Company. In addition, the Company will also be liable for half of any Spin-off Related
Taxes (i) that would not have been imposed but for the existence of both an action by the Company and an action by First Data or
(ii) where the Company and First Data each take actions that, standing alone, would have resulted in the imposition of such Spin-
off Related Taxes. The Company may be similarly liable if it breaches certain representations or covenants set forth in the tax
allocation agreement. If the Company is required to indemnify First Data for taxes incurred as a result of the Spin-off being taxable
to First Data, it likely would have a material adverse effect on the Company's business, financial condition and results of operations.
First Data generally will be liable for all Spin-off Related Taxes, other than those described above.
11. Employee Benefit Plans
Defined Contribution Plans
The Western Union Company Incentive Savings Plan (the "401(k)") covers eligible employees on the United States payroll
of the Company. Employees who make voluntary contributions to this plan receive up to a 4% Company matching contribution.
All matching contributions are immediately vested.
The Company administers more than 25 defined contribution plans in various countries globally on behalf of approximately
1,700 employee participants as of December 31, 2013. Such plans have vesting and employer contribution provisions that vary
by country.