O'Reilly Auto Parts 2014 Annual Report Download - page 71

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FORM 10-K
64
Unrecognized tax benefits:
The following table summarizes the changes in the gross amount of unrecognized tax benefits, excluding interest and penalties, for the
years ended December 31, 2014, 2013 and 2012 (in thousands):
For the Year Ended
December 31,
2014 2013 2012
Balance as of January 1, $ 50,459 $ 51,004 $ 45,800
Additions based on tax positions related to the current year 4,665 7,046 8,100
Additions based on tax positions related to prior years —— 1,301
Payments related to items settled with taxing authorities (300)(1,056) (451)
Reductions due to the lapse of statute of limitations and settlements (5,226)(6,535) (3,746)
Balance as of December 31, $ 49,598 $ 50,459 $ 51,004
For the years ended December 31, 2014, 2013 and 2012, the Company recorded a reserve for unrecognized tax benefits (including interest
and penalties) of $58.4 million, $58.6 million and $59.3 million, respectively. All of the unrecognized tax benefits recorded as of
December 31, 2014, would affect the Company's effective tax rate if recognized, generally net of the federal tax effect of approximately
$16.8 million. The Company recognizes interest and penalties related to uncertain tax positions in income tax expense. As of the years
ended December 31, 2014, 2013 and 2012, the Company had accrued approximately $8.8 million, $8.1 million and $8.3 million,
respectively, of interest and penalties related to uncertain tax positions before the benefit of the deduction for interest on state and federal
returns. During the years ended December 31, 2014, 2013 and 2012, the Company recorded tax expense related to an increase in its
liability for interest and penalties of $2.8 million, $2.1 million and $2.6 million, respectively. Although unrecognized tax benefits for
individual tax positions may increase or decrease during 2015, the Company expects a reduction of $17.0 million of unrecognized tax
benefits during the one-year period subsequent to December 31, 2014, resulting from settlement or expiration of the statute of limitations.
The Company's United States federal income tax returns for tax years 2012 and beyond remain subject to examination by the Internal
Revenue Service (“IRS"). The IRS concluded an examination of the O'Reilly consolidated 2011 federal income tax return in the second
quarter of 2014. The statute of limitations for the Company's federal income tax returns for tax years 2010 and prior expired on
September 15, 2014. The statute of limitations for the Company's U.S. federal income tax return for 2011 will expire on September 15,
2015, unless otherwise extended. The IRS is currently conducting an examination of the Company's consolidated returns for the tax year
2012 and 2013. The Company's state income tax returns remain subject to examination by various state authorities for tax years ranging
from 2003 through 2013.