American Home Shield 2009 Annual Report Download - page 100

Table of Contents
Notes to the Consolidated Financial Statements (Continued)
Note 6. Income Taxes
The Company adopted the provisions of accounting standards for uncertain tax benefits on January 1, 2007. As a result of this adoption, the Company
recorded a $0.8 million increase in the liability for unrecognized tax benefits and a corresponding reduction to the January 1, 2007 balance of retained
earnings. As of December 31, 2009, 2008 and 2007, the Company has $15.4 million, $14.2 million and $13.3 million, respectively, of tax benefits primarily
reflected in state tax returns that have not been recognized for financial reporting purposes ("unrecognized tax benefits"). Included in the balance of
unrecognized tax benefits at December 31, 2007 were $0.4 million of tax benefits that, if recognized, would have affected the effective tax rate and
$12.9 million that would have been recorded as a purchase accounting adjustment to goodwill. Under accounting standards for business combinations, the
reversal of pre-acquisition liabilities for uncertain tax benefits will no longer be recorded as an adjustment to goodwill effective in fiscal years beginning in
2009. At December 31, 2009 and December 31, 2008, $15.4 million and $14.2 million, respectively, of unrecognized tax benefits would impact the effective
tax rate if recognized. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits is as follows:
Successor Predecessor
Year Ended
Dec. 31,
Jul. 25, 2007 to
Dec. 31, 2007
Jan. 1, 2007 to
Jul. 24, 2007
(In millions) 2009 2008
Gross unrecognized tax benefits at beginning of period $ 14.2 $ 13.3 $ 15.9 $ 18.4
Increases in tax positions for prior years 3.3 3.6 — —
Decreases in tax positions for prior years (3.3) (3.1) (1.4) (0.1)
Increases in tax positions for current year 2.6 1.3 0.5 2.9
Settlements — — (1.2) —
Lapse in statute of limitations (1.4) (0.9) (0.5) (5.3)
Gross unrecognized tax benefits at end of period $ 15.4 $ 14.2 $ 13.3 $ 15.9
Up to $7.3 million of the Company's unrecognized tax benefits could be recognized within the next 12 months. As of December 31, 2008 the Company
believed that it was reasonably possible that a decrease of up to $5.1 million in unrecognized tax benefits would have occurred during the year ended
December 31, 2009. During the year ended December 31, 2009 unrecognized tax benefits actually decreased by $4.7 million as a result of the closing of
certain federal and state audits and the expiration of statutes of limitation.
The Company files consolidated and separate income tax returns in the United States federal jurisdiction and in many state and foreign jurisdictions. The
Company has been audited by the United States Internal Revenue Service ("IRS") through its year ended December 31, 2007, and is no longer subject to state
and local or foreign income tax examinations by tax authorities for years before 2001.
In the ordinary course of business, the Company is subject to review by domestic and foreign taxing authorities. For U.S. federal income tax purposes,
the Company participates in the IRS's Compliance Assurance Process whereby its U.S. federal income tax returns are reviewed by the IRS both prior to and
after their filing. The U.S. federal income tax returns filed by the Company through the year ended December 31, 2007 have been audited by the IRS. In the
second quarter and the fourth quarter of 2008, the IRS completed the audits of the Company's tax returns for the year
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