eTrade 2009 Annual Report Download - page 150

A reconciliation of the beginning and ending amount of unrecognized tax benefits as of December 31, 2009
and 2008 is as follows (dollars in thousands):
December 31,
2009 2008 20007
Unrecognized tax benefits, beginning of period $64,655 $ 74,853 $150,428
Additions based on tax positions related to prior years 2,783 1,320 1,402
Additions based on tax positions related to the current year 2,293 18,232 8,687
Reductions based on tax positions related to prior years (1,229) (8,299) (136)
Reductions based on tax positions related to the current year (8,159) (2,240) (79,551)
Settlements with taxing authorities (681) (4,869) (5,472)
Statute of limitations lapses (966) (14,342) (505)
Unrecognized tax benefits, end of period $58,696 $ 64,655 $ 74,853
At December 31, 2009 and 2008, the unrecognized tax benefit was $58.7 million and $64.7 million,
respectively. At December 31, 2009, $39.2 million (net of federal benefits on state issues) represents the amount
of unrecognized tax benefits that, if recognized, would favorably affect the effective income tax rate in future
periods.
The following table summarizes the tax years that are either currently under examination or remain open
under the statute of limitations and subject to examination by the major tax jurisdictions in which the Company
operates:
Jurisdiction Open Tax Year
Hong Kong 2001 – 2009
United Kingdom 2005 – 2009
United States 2005 – 2009
Various states(1) 1999 – 2009
(1) Includes California, Georgia, Illinois, New Jersey, New York and Virginia.
It is likely that certain examinations may be settled or the statute of limitations could expire with regards to
other tax filings, in the next twelve months. In addition, proposed legislation could favorably impact certain of
the Company’s unrecognized tax benefits. Such events would generally reduce the Company’s unrecognized tax
benefits, either because the tax positions are sustained or because the Company agrees to the disallowance, by as
much as $5.6 million, all of which could affect the Company’s total tax provision or the effective tax rate.
The Company’s practice is to recognize interest and penalties, if any, related to income tax matters in
income tax expense. The Company has total gross reserves for interest and penalties of $7.9 million and $5.9
million as of December 31, 2009 and 2008, respectively. The tax benefit for the year ended December 31, 2009
includes an increase in the accrual for interest and penalties of $2.0 million, principally related to the state taxes.
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