HR Block 2014 Annual Report Download - page 79

H&R Block, Inc. | 2014 Form 10-K 71
We intend to indefinitely reinvest the foreign earnings of our foreign subsidiaries; therefore, no provision has been
made for income taxes that might be payable upon remittance of such earnings. The amount of unrecognized tax
liability on these foreign earnings, net of expected foreign tax credits, is less than $10 million as of April 30, 2014.
Changes in unrecognized tax benefits for fiscal years 2014, 2013 and 2012 are as follows:
(in 000s)
Year ended April 30, 2014 2013 2012
Balance, beginning of the year $ 146,391 $ 206,393 $ 154,848
Additions based on tax positions related to prior years 9,743 11,867 26,523
Reductions based on tax positions related to prior years (25,403) (49,493) (3,858)
Additions based on tax positions related to the current year 7,399 2,314 42,735
Reductions related to settlements with tax authorities (23,993) (25,259) (8,742)
Expiration of statute of limitations (11,853) (702) (2,814)
Foreign currency translation —(278) (838)
Other 9,207 1,549 (1,461)
Balance, end of the year $ 111,491 $ 146,391 $ 206,393
The total gross unrecognized tax benefit ending balance as of April 30, 2014, 2013 and 2012, includes $73.7 million,
$95.3 million and $150.4 million, respectively, which if recognized, would impact our effective tax rate. The difference
results from adjusting the gross balances for such items as federal, state and foreign deferred items, interest and
deductible taxes. We believe it is reasonably possible that the balance of unrecognized tax benefits could decrease
by approximately $5 million within the next twelve months due to settlements of audit issues and expiration of statutes
of limitations.
Interest and penalties, if any, accrued on the unrecognized tax benefits are reflected in income tax expense. The
total gross interest and penalties accrued as of April 30, 2014, 2013 and 2012 totaled $24.6 million, $31.7 million and
$38.6 million, respectively.
We file a consolidated federal income tax return in the U.S. with the Internal Revenue Service (IRS) and file tax
returns in various state and foreign jurisdictions. Tax returns are typically examined and settled upon completion of
the examination, with tax controversies settled either at the examination level or through the appeals process.
In August 2013, we received written approval from the IRS Joint Committee on Taxation of the settlement of all
issues related to the examination of our 2008 through 2010 tax returns. We recorded the impact of the settlement
during fiscal year 2014, which reduced uncertain tax benefits by $17.3 million. In addition, we settled with certain
state tax authorities during fiscal year 2014, reducing uncertain tax benefits by $6.7 million. These settlements did
not have a significant impact on our effective tax rate in fiscal year 2014. These settlements and the receipt of the
related tax refunds resulted in a decline in prepaid expenses and other current assets, as we recorded a $151.3 million
current asset for the anticipated refund as of April 30, 2013.
Federal consolidated tax returns for calendar years 2011 and 2012 are currently under examination. Our federal
consolidated income tax returns for calendar years 2013 and 2014 have not yet been filed but, once filed, will be
subject to potential examination.