Dillard's 2009 Annual Report Download - page 33

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Income Taxes
The Company’s estimated federal and state income tax rate, inclusive of equity in (losses) earnings
of joint ventures and exclusive of the effect of nondeductible goodwill write-off, was 15.6% in fiscal
2009, 40.2% in fiscal 2008 and 18.8% in fiscal 2007.
Fiscal 2009
During fiscal 2009, income taxes included the net decrease in unrecognized tax benefits, interest,
and penalties of approximately $6.3 million and included the recognition of tax benefits of
approximately $1.3 million for a decrease in deferred liabilities due to a decrease in the state effective
tax rate, approximately $4.4 million for a decrease in a capital loss valuation allowance resulting from
capital gain income, and approximately $2.4 million due to federal tax credits. The Company is
currently being examined by the IRS for the fiscal tax year 2006 and 2007. During fiscal 2008, the IRS
completed its examination of the Company’s federal income tax returns for the fiscal years 2003
through 2005. Certain issues relating to this examination are currently under appeal. The Company is
also under examination by various state and local taxing jurisdictions for various fiscal years. During
fiscal 2009, the Company reached a settlement with a state taxing jurisdiction which resulted in a
reduction in unrecognized tax benefits, interest, and penalties. At this time, the Company does not
expect the results from any income tax audit to have a material impact on the Company’s financial
statements.
Fiscal 2008
During fiscal 2008, income taxes included the net increase in unrecognized tax benefits, interest,
and penalties of approximately $2.5 million and included the recognition of tax benefits of
approximately $10.5 million for a decrease in a capital loss valuation allowance resulting from capital
gain income and approximately $4.1 million due to federal tax credits.
Fiscal 2007
During fiscal 2007, income taxes included the net decrease in unrecognized tax benefits, interest,
and penalties of approximately $5.9 million, and a recognition of tax benefits of approximately
$1.7 million for a decrease in a capital loss valuation allowance resulting from capital gain income,
approximately $1.3 million for a reduction in state tax liabilities due to a restructuring that occurred
during this period and approximately $3.3 million due to federal tax credits.
29