ADP 2009 Annual Report Download - page 62

The Company has estimated foreign net operating loss carry-forwards of approximately $96.1 million as of June 30, 2009, of which $35.2
million expires in 2011 through 2023 and $60.9 million has an indefinite utilization period. In addition, the Company has estimated Federal net
operating loss carry-forwards of acquired companies of approximately $35.6 million as of June 30, 2009, which expire in 2010 through 2027.
There is an annual limitation pursuant to Internal Revenue Code section 382 on the utilization of the Federal net operating loss carry-forwards
of approximately $17.4 million per year. The Company has estimated state net operating loss carry-forwards of approximately $235.6 million
as of June 30, 2009, which expire in 2010 through 2028.
The Company has recorded valuation allowances of $51.7 million and $44.4 million at June 30, 2009 and 2008, respectively, to reflect the
estimated amount of domestic and foreign deferred tax assets that may not be realized. A portion of the valuation allowances in the amounts of
approximately $2.9 million and $4.7 million at June 30, 2009 and 2008, respectively, relate to net deferred tax assets which were recorded in
purchase accounting. Any recognition of net deferred tax assets in future years will be a reduction to goodwill until the adoption of SFAS No.
141R. Subsequent to the adoption of SFAS No. 141R, any such adjustments in future years will be recorded to our provision for income taxes
on the Statements of Consolidated Earnings.
Income tax payments were approximately $719.1 million, $755.7 million, and $718.2 million for fiscal 2009, 2008 and 2007, respectively.
As of June 30, 2009 and 2008, the Company’ s liabilities for unrecognized tax benefits, which include interest and penalties, were $92.8 million
and $404.2 million, respectively. The amount that, if recognized, would impact the effective tax rate is $42.0 million and $171.2 million,
respectively. The remainder, if recognized, would principally affect deferred taxes.
A reconciliation of the beginning and ending amounts of unrecognized tax benefits is as follows:
Subsequent to the adoption of FIN 48 on July 1, 2007, interest expense and penalties associated with uncertain tax positions have been
recorded in the provision for income taxes on the Statements of Consolidated Earnings. Prior to the adoption of FIN 48 on July 1, 2007, interest
expense was recorded in selling, general and administrative expenses. During the fiscal years ended June 30, 2009, 2008 and 2007, the
Company recorded interest expense of $15.5 million, $18.4 million and $11.5 million, respectively. At June 30, 2009, the Company had
accrued interest of $29.4 million recorded on the Consolidated Balance Sheets, all of which was recorded within other liabilities. At June 30,
2008, the Company had accrued interest of $117.6 million recorded on the Consolidated Balance Sheets, of which $53.5 million was recorded
within income taxes payable, and the remainder was recorded within other liabilities. At June 30, 2009, the Company had accrued penalties of
$0.5 million recorded on the Consolidated Balance Sheets, all of which was recorded within other liabilities. At June 30, 2008, the Company
had accrued penalties of $26.9 million, of which $23.8 million was recorded within income taxes payable, and the remainder was recorded
within other liabilities on the Consolidated Balance Sheets.
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Unrecognized tax benefits at July 1, 2007 $ 350.2
Additions for tax positions of the fiscal year ended June 30, 2008 23.6
Reductions for tax positions of the fiscal year ended June 30, 2008 -
Additions for tax positions of periods prior to the fiscal year ended June 30, 2008 43.2
Reductions for tax positions of periods prior to the fiscal year ended June 30, 2008 (11.5)
Settlements with tax authorities (1.1)
Expiration of the statute of limitations (4.0)
Impact of foreign exchange rate fluctuations 3.8
Unrecognized tax benefits at June 30, 2008 $404.2
Unrecognized tax benefits at July 1, 2008 $404.2
Additions for tax positions of the fiscal year ended June 30, 2009 19.0
Reductions for tax positions of the fiscal year ended June 30, 2009 (6.4)
Additions for tax positions of periods prior to the fiscal year ended June 30, 2009 111.4
Reductions for tax positions of periods prior to the fiscal year ended June 30, 2009 (207.7)
Settlements with tax authorities (216.9)
Expiration of the statute of limitations (3.5)
Impact of foreign exchange rate fluctuations (7.3)
Unrecognized tax benefits at June 30, 2009 $92.8