American Home Shield 2008 Annual Report Download - page 95
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Table of Contents
Notes to the Consolidated Financial Statements (Continued)
Note 6. Income Taxes (Continued)
process of auditing state income tax returns of various subsidiaries. One state audit is at the appeals level.
The Company's policy is to recognize potential interest and penalties related to its tax positions within the tax provision. During the year ended
December 31, 2008, the Company recognized interest expense of $0.9 million and penalties of $0.4 million through the tax provision. As of December 31,
2008, the Company had accrued for the payment of interest and penalties of approximately $3.7 million. During the Successor period from July 25, 2007 to
December 31, 2007 and the Predecessor period from January 1, 2007 to July 24, 2007, the Company recognized interest income of approximately $0.3 million
and $0.8 million, respectively, through the tax provision, primarily as a result of the expiration of the statutes of limitation on certain tax positions and
favorable state audit settlements. As of December 31, 2007, the Company had accrued for the payment of interest and penalties of approximately $2.4 million.
The reconciliation of income tax computed at the U.S. federal statutory tax rate to the Company's effective income tax rate for continuing operations is as
follows:
Successor
Predecessor
Year Ended
Dec. 31, 2008
Jul. 25, 2007 to
Dec. 31, 2007
Jan. 1, 2007 to
Jul. 24, 2007 2006
Tax at U.S. federal statutory rate (35.0)% (35.0)% 35.0% 35.0%
State and local income taxes, net of U.S. federal benefit 2.0 (0.8) 4.3 3.5
Tax credits (1.3) (0.6) (0.8) (0.7)
State NOL not previously recorded — — — (2.0)
Change in Valuation Allowance 5.2 — — —
Other, including reserves and permanent items 5.2 1.3 (0.9) (1.9)
Effective rate (23.9)% (35.1)% 37.6% 33.9%
The effective tax rate for discontinued operations for the year ended December 31, 2008, the Successor period from July 25, 2007 to December 31, 2007
and the Predecessor period from January 1, 2007 to July 24, 2007 was a tax benefit of 39.3%, 31.8% and 40.1%, respectively. The effective tax rate for
discontinued operations was a tax benefit of 5.8% in 2006 (which included the impact of non-deductible goodwill).
Income tax expense from continuing operations is as follows:
Successor 2008
(In thousands) Current Deferred Total
U.S. federal $ — $(45,159)$(45,159)
State and local 11,958 (5,099) 6,859
$11,958 $(50,258)$(38,300)
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