Equifax 2006 Annual Report Download - page 72

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
70 EQUIFAX 2006 ANNUAL REPORT
Tax Matters. In 2003, the Canada Revenue Agency (“CRA”)
issued Notices of Reassessment, asserting that Acrofax, Inc.,
a wholly-owned Canadian subsidiary of Equifax, is liable for
additional tax for the 1995 through 2000 tax years, related to
certain intercompany capital contributions and loans. The
additional tax sought by the CRA for these periods ranges,
based on alternative theories, from $7.4 million ($8.5 million
in Canadian dollars) to $16.4 million ($19.0 million in
Canadian dollars) plus interest and penalties. Acrofax has
fi led Notices of Objection in response to the Notices of
Reassessment. On September 2, 2003, we made a statuto-
rily-required deposit of $6.8 million in Canadian dollars
($5.9 million and $5.7 million at December 31, 2006 and
2005, respectively, in U.S. dollars) against the CRA’s primary
assessment theory, which is included in Other assets in our
Consolidated Balance Sheets at December 31, 2006 and
2005. We intend to vigorously contest these reassessments
and do not believe we have violated any statutory provision
or rule. If the fi nal outcome of this matter was unfavorable
to us, an additional claim may be fi led by the local prov-
ince; the likelihood and potential amount of such claim is
unknown at this time. We cannot predict when this tax mat-
ter will be resolved.
7.
INCOME TAXES
We record deferred income taxes using enacted tax laws
and rates for the years in which the taxes are expected to be
paid. Deferred income tax assets and liabilities are recorded
based on the differences between the fi nancial reporting
and income tax bases of assets and liabilities. See Note 1 for
additional information about our income tax policy.
The provision for income taxes from continuing operations
consisted of the following:
Twelve Months Ended
December 31,
(In millions) 2006 2005 2004
Current:
Federal $ 9 3 .7 $ 89.8 $ 74.7
State 6.0 10.2 12.9
Foreign 44.3 32.8 24.7
144.0 132.8 112.3
Deferred:
Federal (0.8) 13.9 30.9
State (4.5) (3.0) 2.7
Foreign 2.7 0.5 2.0
(2.6) 11.4 35.6
Provision for income taxes $141.4 $144.2 $147.9
Domestic and foreign income from continuing opera-
tions before income taxes was as follows:
Twelve Months Ended
December 31,
(In millions) 2006 2005 2004
U.S. $298.0 $286.3 $302.8
Foreign 117.9 104.4 82.4
$ 415.9 $390.7 $ 385.2
The provision for income taxes from continuing opera-
tions is reconciled with the federal statutory rate, as follows:
Twelve Months Ended
December 31,
(Dollars in millions) 2006 2005 2004
Federal statutory rate 35.0% 35.0% 35.0%
Provision computed at
federal statutory rate $145.6 $136.8 $134.8
State and local taxes, net
of federal tax benefi t 0.6 4.6 10.3
Foreign 6.9 1.2 2.0
Valuation allowance (0.7) 0.4 (13.0)
Tax reserves* (7.0) (1.8) 12.9
Other** (4.0) 3.0 0.9
Provision for income taxes $141.4 $144.2 $147.9
Effective income tax rate 34.0% 36.9% 38.4%
* During the third quarter of 2006, the applicable statute of limi-
tations related to uncertain tax positions expired, resulting in
the reversal of the related income tax reserve. The reversal of the
reserves resulted in a $9.5 million income tax benefi t. This is
refl ected in tax reserves on the effective tax reconciliation and
reduced our 2006 effective tax rate by 2.3%.
** During the second quarter of 2006, we recognized a non-taxable
gain of $14.1 million related to the litigation settlement with
Naviant, Inc. The non-taxable gain reduced our 2006 effective rate
by 1.3%. See Note 6 for additional information about this matter.