Dollar Rent A Car 2010 Annual Report Download - page 25

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comparable to the prior tax year. Our ability to defer the gains on the disposition of our vehicles
under our Like-Kind Exchange Program is affected by significant downsizing of our fleet. Projection
of the results under the Like-Kind Exchange Program is complex, requires numerous assumptions
and is not subject to precise estimation. Actual results depend upon future sale and purchase
transactions extending up to 180 days after year-end and actual results may differ from current
projections.
In September 2010, Congress passed and the President signed into law the Small Business
Jobs and Credit Act of 2010 (the “Small Business Act”), which extended 50% bonus depreciation
allowances for assets placed in service in 2010, retroactive to the first of the year. In December
2010, Congress passed and the President signed into law the Tax Relief, Unemployment Insurance
Reauthorization, and Job Creation Act of 2010 (the “Tax Relief Act”) which increased the bonus
depreciation allowance to 100% for assets placed in service from September 9, 2010 through
December 31, 2011, as well as provided for 50% bonus depreciation for assets placed in service in
2012. The combined effect of the Small Business Act and the Tax Relief Act (collectively, the “Acts”)
is to significantly reduce our federal income taxes for the years affected and to result in a refundable
overpayment of 2010 federal tax amounts deposited prior to the enactment of the Acts. We expect
to fully recover these overpayments in 2011 through cash refunds and offsets to potential 2011
federal income taxes payable. The Company’s ability to continue to defer the reversal of prior period
tax deferrals will depend on a number of factors, including the size of the Company’s fleet, as well as
the availability of accelerated depreciation methods in future years. Accordingly, the Company may
make material cash tax payments in future periods.
Seasonality
Our business is subject to seasonal variations in customer demand, with the summer
vacation period representing the peak season for vehicle rentals. Any event that disrupts rental
activity, fleet supply, or industry fleet capacity during the second and third quarters could have a
disproportionately material adverse effect on our liquidity, our cash flows and/or our results of
operations in those periods and for the full year.
Customer Surcharges
In almost every state, we recover various costs associated with the title and registration of
our vehicles and, where permitted, the concession cost imposed by airport authorities or the owners
and/or operators of the premises from which our vehicles are rented. Consistent with industry-wide
business practices, we separately state these additional surcharges in our rental agreements and
invoices and disclose the existence of these surcharges to customers together with an estimated
total price, inclusive of these surcharges, in all distribution channels. This standard practice complies
with the Federal Trade Commission Act and has been upheld by several courts. However, there are
several legislative proposals in certain states that, if enacted, would define which surcharges are
permissible and establish calculation formulas that may differ from the manner in which we set our
surcharges.
Enactment of any of these proposals could restrict our ability to recover all of the surcharges
we currently charge and may have a material adverse impact on our results of operations.
Laws and Regulations
We are subject to a wide variety of laws and regulations in the U.S. and Canada and other
jurisdictions in which we operate, and changes in the level of government regulation of our business
have the potential to materially alter our business practices and adversely affect our financial position
and results of operations, including our profitability. Depending on the jurisdiction, those changes
may come about through new legislation, the issuance of new laws and regulations or changes in the
interpretation of existing laws and regulations by a court, regulatory body or governmental official.
Optional insurance products, including supplemental liability insurance, personal accident
insurance and personal effects protection, we offer to renters providing various insurance coverages
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