Avis 2010 Annual Report Download - page 86

Table of Contents
The following is a tabular reconciliation of the gross amount of unrecognized tax benefits for the year:
Substantially all of the gross amount of the unrecognized tax benefits at December 31, 2010, 2009 and 2008, if recognized, would affect the
Company’s provision for or, benefit from income taxes. As of December 31, 2009 and 2008, the Company’s unrecognized tax benefits were
offset by tax credits in the amount of $104 million and tax loss carryforwards in the amount of $10 million. The Company does not
anticipate that total unrecognized tax benefits will change significantly in 2011.
As of December 31, 2009, the unrecognized tax benefits recorded in accounts payable and other current liabilities were $383 million. As of
December 31, 2010, 2009 and 2008, the unrecognized tax benefits in long-term income taxes payable were $37 million, $100 million and
$480 million, respectively, which were recorded as a component of Other non-current liabilities on the Consolidated Balance Sheets.
Pursuant to the Tax Sharing Agreement entered into in connection with the Separation and the Separation Agreement, the Company is
entitled to indemnification for non-Avis Budget Car Rental tax contingencies for taxable periods prior to and including the Separation. The
majority of the $37 million of unrecognized tax benefits at December 31, 2010 are non-Avis Budget Car Rental tax contingencies.
During the twelve months ended December 31, 2010, the Company reduced its liabilities for accrued interest by $105 million and as of
December 31, 2010, accrued interest was $20 million. In the twelve months ended December 31, 2009 and 2008, the Company recorded
additional liabilities of $19 million and $51 million, respectively, for the accrual of interest. These accruals had a minimal impact on the
Company’s results of operations as the Company is entitled to indemnification for a substantial portion of such liabilities and recognized
corresponding receivables from Realogy and Wyndham. The Company recognizes potential interest and corresponding indemnification
from Realogy and Wyndham, related to unrecognized tax benefits within interest expense related to corporate debt, net on the accompanying
Consolidated Statements of Operations. Penalties incurred during the twelve months ended December 31, 2010, 2009 and 2008, were not
significant and were recognized as a component of income taxes.
During 2010, the Company reached a settlement with the Internal Revenue Service (“IRS”) with respect to its examination of the
Company’s taxable years 2003 through 2006, the year of the Separation. The Company was entitled to indemnification for most pre-
separation tax matters from Realogy and Wyndham and therefore amounts due to the IRS at the conclusion of the audit did not have a
material impact on the Company’s financial position. The Company made payments to the IRS and state tax authorities of $144 million,
including interest, in conjunction with the conclusion of the audit, all of which were funded by Realogy and Wyndham. The Company was
also reimbursed $89 million by Wyndham for the use of certain of the Company’
s tax attributes in connection with the conclusion of the IRS
audit. As a result of the conclusion of the audit, the Company reduced income taxes payable and related receivables from Realogy and
Wyndham by approximately $295 million, which items offset within income from discontinued operations. In addition, in connection with
the conclusion of the IRS audit, a reallocation of certain deferred taxes with our former subsidiaries resulted in a $16 million decrease to
stockholders’ equity. The reductions in income taxes payable and receivables from Realogy and Wyndham are reflected in accounts payable
and other current liabilities, and other current assets, respectively, as of December 31, 2010.
F
-
22
2010
2009
2008
Balance at January 1
$
603
$
601
$
612
Additions based on tax positions related to the current year
-
1
-
Additions for tax positions for prior years
9
6
27
Reductions for tax positions for prior years
(443
)
(4
)
(36
)
Settlements
(129
)
(1
)
(2
)
Balance at December 31
$
40
$
603
$
601