Paychex 2014 Annual Report Download - page 78

PAYCHEX, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The Company has concluded all U.S. federal income tax matters through the fiscal year ended May 31,
2010. Fiscal 2013 is currently under audit by the IRS and fiscal years 2011, 2012, and 2014 are subject to
potential audit. With limited exception, state income tax audits by taxing authorities are closed through the fiscal
year ended May 31, 2009, primarily due to expiration of the statute of limitations.
The Company continues to follow its policy of recognizing interest and penalties accrued on tax positions as
a component of income taxes on the Consolidated Statements of Income and Comprehensive Income. The
amount of accrued interest and penalties associated with the Company’s tax positions is immaterial to the
Consolidated Balance Sheets. The amount of interest and penalties recognized for fiscal years 2014, 2013, and
2012 was immaterial to the Company’s results of operations.
Note J — Accumulated Other Comprehensive Income
The change in unrealized gains and losses, net of applicable taxes, related to available-for-sale securities is
the primary component reported in accumulated other comprehensive income in the Consolidated Balance
Sheets. The changes in accumulated other comprehensive income are as follows:
Year ended May 31,
In millions 2014 2013 2012
Beginning balance ................................................... $22.0 $ 37.7 $37.5
Other comprehensive (loss)/income:
Unrealized holding gains/(losses) ..................................... 0.3 (24.1) 1.3
Income tax (expense)/benefit related to unrealized holding gains/(losses) ..... (0.4) 9.0 (0.4)
Reclassification adjustment for the net gain on sale of available-for-sale
securities realized in net income .................................... (0.6) (0.9) (1.0)
Income tax expense on reclassification adjustment for the net gain on sale of
available-for-sale securities ....................................... 0.2 0.3 0.3
Total other comprehensive (loss)/income, net of tax ...................... (0.5) (15.7) 0.2
Ending balance .................................................... $21.5 $ 22.0 $37.7
The total tax impact in other comprehensive (loss)/income was tax expense of $0.2 million, tax benefit of
$9.3 million, and tax expense of $0.1 million for fiscal years 2014, 2013, and 2012, respectively. Reclassification
adjustments out of accumulated other comprehensive income are for realized gains on the sales of available-for-
sale securities and impacted interest on funds held for clients on the Consolidated Statements of Income and
Comprehensive Income.
Note K — Supplemental Cash Flow Information
Income taxes paid were $317.8 million, $371.0 million, and $301.4 million for fiscal years 2014, 2013, and
2012, respectively.
Lease incentives received in the form of tenant allowances and free rent were $6.7 million, $6.4 million, and
$12.8 million for fiscal years 2014, 2013, and 2012, respectively.
Note L — Employee Benefit Plans
401(k) plan: The Company maintains a contributory savings plan that qualifies under section 401(k) of
the Internal Revenue Code. The Paychex, Inc. 401(k) Incentive Retirement Plan (the “Plan”) allows all
employees to immediately participate in the salary deferral portion of the Plan, contributing up to a maximum of
50% of their salary, subject to Internal Revenue Service limitations. Employees who have completed one year of
service are eligible to receive a company matching contribution, when such contribution is in effect. The
60