Netgear 2010 Annual Report Download - page 83

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Table of Contents
A reconciliation of the beginning and ending amount of gross unrecognized tax benefits (“UTB”) is as follows (in thousands):
The total amount of net unrecognized tax benefits that, if recognized would affect the effective tax rate as of December 31, 2010 is $16.3
million. The ending net UTB results from adjusting the gross balance at December 31, 2010 for items such as U.S. federal and state deferred tax,
foreign tax credits, interest, and deductible taxes. The net UTB is included as a component of non-current income taxes payable within the
consolidated balance sheet.
The Company recognizes interest and penalties accrued related to unrecognized tax benefits in income tax expense. During the period
ended December 31, 2010, December 31, 2009 and December 31, 2008, total interest and penalties expensed were $262,000, $354,000 and
$515,000, respectively. As of December 31, 2010 and December 31, 2009, accrued interest and penalties on a gross basis was $1.8 million and
$1.5 million, respectively. Included in accrued interest are amounts related to tax positions for which the ultimate deductibility is highly certain
but for which there is uncertainty about the timing of such deductibility. Because of the impact of deferred tax accounting, other than interest, the
impact of any uncertain tax benefits related to temporary differences would not affect the annual effective tax rate but would accelerate the
payment of cash to the taxing authority to an earlier period.
With the exception of those foreign sales subsidiaries for which deferred tax has been provided, the Company intends to indefinitely
reinvest foreign earnings. These earnings were approximately $10.1 million and $13.2 million as of December 31, 2010 and December 31, 2009,
respectively. Because of the availability of U.S. foreign tax credits, it is not practicable to determine the income tax liability that would be
payable if such earnings were not indefinitely reinvested.
81
Federal,
State, and
Foreign Tax
Gross UTB Balance at January 1, 2008
$
9,336
Additions based on tax positions related to the current year
3,940
Additions for tax positions of prior years
658
Reductions for tax positions of prior years
(140
)
Reductions due to lapse of applicable statutes
(503
)
Gross UTB Balance at December 31, 2008
13,291
Additions based on tax positions related to the current year
3,608
Additions for tax positions of prior years
184
Reductions for tax positions of prior years
(1
)
Reductions due to lapse of applicable statutes
(581
)
Gross UTB Balance at December 31, 2009
16,501
Additions based on tax positions related to the current year
3,371
Additions for tax positions of prior years
409
Settlements
(47
)
Reductions due to lapse of applicable statutes
(1,805
)
Adjustments due to foreign exchange rate movement
Gross UTB Balance at December 31, 2010
18,432