Avis 2014 Annual Report Download - page 89

F-22
provision has been made for U.S. federal deferred income taxes on approximately $853 million of
accumulated and undistributed earnings of foreign subsidiaries at December 31, 2014, since it is the present
intention of management to reinvest the undistributed earnings indefinitely in those foreign operations. The
determination of the amount of unrecognized U.S. federal deferred income tax liability for unremitted
earnings is not practicable.
The reconciliation between the U.S. federal income tax statutory rate and the Company’s effective income
tax rate is as follows:
Year Ended December 31,
2014 2013 2012
U.S. federal statutory rate 35.0% 35.0% 35.0%
Adjustments to reconcile to the effective rate:
State and local income taxes, net of federal tax benefits 3.3 4.1 4.9
Changes in valuation allowances (a) (3.0) 15.5 0.9
Taxes on foreign operations at rates different than
statutory U.S. federal rates 1.4 5.9 —
Resolution of prior years’ examination issues — — (42.5)
Non-deductible debt extinguishment costs — 18.8 4.7
Non-deductible transaction-related costs — 3.2 0.3
Other non-deductible expenses 0.9 2.3 0.6
Other (0.1) (1.3) (0.6)
37.5% 83.5% 3.3%
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(a) For the year ended December 31, 2013, includes 13.1% related to our impairment expense.
The following is a tabular reconciliation of the gross amount of unrecognized tax benefits for the year:
2014 2013 2012
Balance at January 1 $ 63 $ 54 $ 186
Additions for tax positions related to current year 5 4 4
Additions for tax positions for prior years 5 9 5
Reductions for tax positions for prior years (8) — (140)
Settlements (2) — (1)
Statute of limitations — (4) —
Balance at December 31 $ 63 $ 63 $ 54
In 2012, the Company recorded a reduction in its unrecognized tax benefits primarily due to an effective
settlement of $128 million for pre-2007 taxes. The Company does not anticipate that total unrecognized tax
benefits will change significantly in 2015.
Substantially all of the gross amount of the unrecognized tax benefits at December 31, 2014, 2013 and
2012, if recognized, would affect the Company’s provision for, or benefit from, income taxes. As of
December 31, 2014, the Company’s unrecognized tax benefits were offset by tax loss carryforwards in the
amount of $18 million.
The following table presents unrecognized tax benefits:
As of December 31,
2014 2013
Unrecognized tax benefit in non-current income taxes payable (a) $45$44
Accrued interest payable on potential tax liabilities (b) 30 28
__________
(a) Pursuant to the agreements governing the disposition of certain subsidiaries in 2006, the Company is entitled to
indemnification for certain pre-disposition tax contingencies. As of December 31, 2014 and 2013, $16 million and
$15 million, respectively, of unrecognized tax benefits are related to tax contingencies for which the Company
believes it is entitled to indemnification.
(b) The Company recognizes potential interest 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, 2014, 2013 and 2012, were not significant and were recognized as a
component of income taxes.