ADP 2010 Annual Report Download - page 84

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Canada has substantially completed its joint audit with the Province of Ontario for the fiscal years ended June 30, 2005 through June
30, 2007.
The Company regularly considers the likelihood of assessments resulting from examinations in each of the jurisdictions. The
resolution of tax matters is not expected to have a material effect on the consolidated financial condition of the Company, although a
resolution could have a material impact on the Company
’
s Statements of Consolidated Earnings for a particular future period and on
the Company
’
s effective tax rate.
If certain pending tax matters settle within the next twelve months, the total amount of unrecognized tax benefits may increase or
decrease for all open tax years and jurisdictions. Based on current estimates, settlements related to various jurisdictions and tax
periods could increase earnings up to $10.0 million in the next twelve months. We do not expect any cash payments related to
unrecognized tax benefits in the next twelve months. Audit outcomes and the timing of audit settlements are subject to significant
uncertainty. We continually assess the likelihood and amount of potential adjustments and adjust the income tax provision, the
current tax liability and deferred taxes in the period in which the facts that give rise to a revision become known.
In January 2010, the Company reached an agreement with the IRS regarding all outstanding tax audit issues in dispute for the tax
years 2007 and 2008, which did not have a material impact to the effective tax rate.
In June 2009, the Company reached an agreement with the IRS regarding all outstanding tax audit issues with the IRS in dispute for
the tax years 1998 through 2006. As a result, the Company owed the IRS and other tax jurisdictions $217.5 million, which was
satisfied by applying $113.2 million of funds on deposit and making cash payments of $103.0 million in fiscal 2010. The impact of this
agreement was offset by a receivable of $168.1 million from the IRS and other tax jurisdictions, of which $152.3 million was received in
fiscal 2010. The remaining balances are expected to be settled in fiscal 2011. In fiscal 2009, the Company had previously recorded a
liability for unrecognized tax benefits of $317.6 million and recorded a benefit to the provision for income taxes of $99.7 million.
Additionally, in fiscal 2009, the Company included a cumulative adjustment between domestic and foreign earnings as a result of the
audit settlement described above and a related agreement with a foreign tax authority, and as a result, included a foreign tax benefit
of $119.7 million in its income tax provision.
In April 2009, the Company settled a state tax matter, for which the Company had previously recorded a liability for unrecognized tax
benefits of $14.2 million and a related deferred tax asset of $5.1 million. Accordingly, the Company recorded a reduction in the
provision for income taxes of $9.2 million during the fourth quarter of fiscal 2009 related to the reversal of the liability for
unrecognized tax benefits and the related deferred tax asset. In addition, the Company received a tax credit of $11.1 million related to
the same matter, which further reduced the provision for income taxes during the fourth quarter of fiscal 2009.
During the fiscal year ended June 30, 2008, the Company recorded a reduction in the provision for income taxes of $12.4 million,
which was primarily related to the settlement of a state tax matter, for which the Company had previously recorded a liability for
unrecognized tax benefits of $7.9 million and a related deferred tax asset of $2.9 million.
During fiscal 2008, the Company recorded a tax
-
basis adjustment to capital in excess of par value on the Statements of Consolidated
Stockholders
’
Equity, which was related to a business that the Company acquired in May 1999 that was accounted for by the
Company as a pooling of interests.
65