Cash America 2013 Annual Report Download - page 162

CASH AMERICA INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
137
The effective tax rate on income differs from the federal statutory rate of 35% for the following reasons
(dollars in thousands):
Year Ended December 31,
2013 2012 2011
Tax provision computed at the federal statutory income tax rate $ 60,757 $ 65,212 $ 76,134
State and local income taxes, net of federal tax benefits 2,395 3,587 3,790
N
ondeductible lobbying 690 865 882
Foreign tax difference (297) 2,027 587
Investment in subsidiaries (a) (23,907) (9,338) -
Valuation allowance (9,371) 21,846 -
Tax effect of Regulatory Penalty(b) 1,790 - -
Change in reserve for uncertain tax benefits, net (1,021) - -
Other (282) 457 967
Total provision $ 30,754 $ 84,656 $ 82,360
Effective tax rate 17.7 % 45.4 %37.9 %
(
a
)
For the years ended December 31, 2013 and 2012, relates to the Creazione Deduction.
(b
)
Represents the tax effect of the $5.0 million penalty paid to the CFPB, which is nondeductible for tax purposes, in
connection with the Regulatory Penalty. See Note 13.
 As of December 31, 2013, the Company had net operating losses totaling $58.6 million related to its Mexico
subsidiaries. Mexico allows a ten-year carryforward period, and, if unutilized, these net operating losses will expire in
varying amounts beginning in 2018. Most of these net operating losses relate to Creazione and are expected to expire
unutilized.
The Company performs an evaluation of the recoverability of its deferred tax assets on a quarterly basis. The
Company establishes a valuation allowance if it is more-likely-than-not (greater than 50 percent) that all or some
portion of the deferred tax asset will not be realized. The Company analyzes several factors, including the nature and
frequency of operating losses, the Company’s carryforward period for any losses, the reversal of future taxable
temporary differences, the expected occurrence of future income or loss and the feasibility of available tax planning
strategies to protect against the loss of deferred tax assets.
The Company recorded a valuation allowance against its gross deferred tax assets of $13.8 million and $21.8
million as of December 31, 2013 and December 31, 2012, respectively. In 2013, the Company released a $9.3 million
valuation allowance related to the deferred tax asset associated with the Company’s excess tax basis over its basis for
financial reporting purposes in the stock of Creazione and recorded an additional $1.3 million valuation allowance
related to deferred tax assets at its Mexico subsidiaries. The Company believes that it is reasonably possible that the
formal liquidation of Creazione could be finalized in 2014 resulting in the write off of approximately $12.5 million of
deferred tax assets, mostly related to the net operating loss carryovers described above, and the release of the related
valuation allowance.

The aggregate change in the balance of the unrecognized tax benefits for the years ended December 31, 2013,
2012 and 2011 is summarized below (dollars in thousands):

2013 2012 2011
Balance at January 1, $ 1,021 $ 955 $ 1,082
Decrease due to lapse of statute of limitations (1,021) - -
Effect of change in foreign currency rates - 66 (127)
Balance at December 31, $- $1,021 $ 955

During 2013, the statute of limitations expired related to the Mexico tax returns of Creazione for periods
before it was acquired by the Company (pre-2008). As a result, in the third quarter of 2013, the Company released