O'Reilly Auto Parts 2008 Annual Report Download - page 62

PG.60 O’REILLY AUTOMOTIVE 2008 ANNUAL REPORT
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
e provision for income taxes consists of the following:
(In thousands) Current Deferred Total
2008:
Federal $ 90,544 9,313 99,857
State 14,725 1,718 16,443
$ 105,269 11,031 116,300
2007:
Federal $ 110,302 $ (5,847) $ 104,455
State 9,539 (494) 9,045
$ 119,841 $ (6,341) $ 113,500
2006:
Federal $ 96,824 $ (938) $ 95,886
State 8,373 (79) 8,294
$ 105,197 $ (1,017) $ 104,180
A reconciliation of the provision for income taxes to the amounts computed at the federal statutory rate is as follows:
(In thousands) 2008 2007 2006
Federal income taxes at statutory rate $ 105,887 $ 107,620 $ 98,793
State income taxes, net of federal tax benet 10,633 5,880 5,387
Other items, net (220) -- --
$ 116,300 $ 113,500 $ 104,180
e excess tax benet associated with the exercise of non-qualied stock options has been reected as additional paid-in capital in the
accompanying consolidated nancial statements.
As of December 31, 2008, the Company had net operating losses for federal income tax purposes of $110.8 million (for which a portion are also
available for state tax purposes) and general business tax credit carryforwards available for federal and state tax purposes of $2.5 million and
$4.3 million, respectively. e Company also has an alternative minimum tax credit carryforward for federal tax purposes of $2.5 million. e
net operating losses generally expire in years ranging from 2021 to 2027, and the tax credits generally expire in years ranging from 2019 to 2028.
e alternative minimum tax credit carryforward does not expire.
e Company adopted the provisions of Financial Accounting Standards Board (“FASB”) Interpretation No. 48, “Accounting for Uncertainty
in Income Taxes - an interpretation of FASB Statement No. 109” (“FIN 48”) on January 1, 2007. is interpretation provides guidance on
measurement, recognition and derecognition of benets, classication, interest and penalties, accounting in interim periods, disclosure and
transition and requires that income tax positions must meet a more-likely-than-not recognition threshold at the eective date to be recognized.
No adjustment was required in the liability for unrecognized income tax benets as a result of the implementation of FIN 48. As of December
31, 2007, and December 31, 2008, the Company had recorded a reserve for unrecognized tax benets (including interest and penalties) of
$19.7 million and $34.3 million, respectively, of which, would aect the Company’s eective tax rate if recognized, generally net of federal tax
aect. e Company recognizes interest and penalties related to uncertain tax positions in income tax expense. As of December 31, 2007, and
December 31, 2008, the Company had accrued approximately $2.8 million, and $3.9 million, respectively, of interest and penalties related to
uncertain tax positions before the benet of the deduction for interest on state and federal returns. During the years ended December 31, 2007,
and December 31, 2008, the Company recorded tax expense related to an increase in its liability for interest and penalties of $1.3 million and
$1.4 million, respectively. Although unrecognized tax benets for individual tax positions may increase or decrease during 2009, the Company
expects a reduction of $1.6 million of unrecognized tax benets during the one-year period subsequent to December 31, 2008, resulting from
settlement or expiration of the statute of limitations.
e O’Reilly U.S. federal income tax returns for tax years 2005 and beyond remain subject to examination by the Internal Revenue Service
(“IRS”). e IRS concluded an examination of the O’Reilly consolidated 2002, 2003 and 2004 federal income tax returns in the rst quarter of
2007. e statute of limitations for the O’Reilly federal income tax returns for tax years 2004 and prior have expired. e statute of limitations