Rite Aid 2013 Annual Report Download - page 86

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RITE AID CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
For the Years Ended March 2, 2013, March 3, 2012 and February 26, 2011
(In thousands, except per share amounts)
5. Income Taxes (Continued)
acquisition. Accordingly, as of March 2, 2013, March 3, 2012 and February 26, 2011, the Company had
a corresponding recoverable indemnification asset of $30,710, $156,797 and $158,209 from Jean Coutu
Group, included in the ‘‘Other Assets’’ line of the Consolidated Balance Sheets, to reflect the
indemnification for such liabilities.
Over the next 12 months, the Company believes that it is reasonably possible that the
unrecognized tax positions reflected in the table above could decrease by $13,775, all of which would
impact the effective tax rate if its tax positions are sustained upon audit, the controlling statute of
limitations expires or the Company agrees to a disallowance.
The Company recognizes interest and penalties related to tax contingencies as income tax expense.
Prior to the adoption of ASC 740, ‘‘Income Taxes,’’ the Company included interest as income tax
expense and penalties as an operating expense. The Company recognized (benefit)/expense for interest
and penalties in connection with tax matters of $(43,069), $(2,113) and $8,937 for fiscal years 2013,
2012 and 2011, respectively. As of March 2, 2013 and March 3, 2012 the total amount of accrued
income tax-related interest and penalties was $22,197 and $65,266, respectively.
The Company files U.S. federal income tax returns as well as income tax returns in those states
where it does business. The consolidated federal income tax returns have been subject to examination
by the IRS through fiscal 2008, including the Brooks Eckerd pre-acquisition periods. However, any net
operating losses that were generated in these prior closed years may be subject to examination by the
IRS upon utilization. Tax examinations by various state taxing authorities could generally be conducted
for a period of three to five years after filing of the respective return. However, as a result of filing
amended returns, the Company has statutes open in some states from fiscal year 2005.
Net Operating Losses and Tax Credits
At March 2, 2013, the Company had federal net operating loss (NOL) carryforwards of
approximately $3,799,118, the majority of which will expire, if not utilized, between fiscal 2019 and
2022.
At March 2, 2013, the Company had state NOL carryforwards of approximately $5,015,041, the
majority of which will expire between fiscal 2018 and 2026.
At March 2, 2013, the Company had federal business tax credit carryforwards of $50,080, the
majority of which will expire between 2019 and 2021. In addition to these credits, the Company had
alternative minimum tax credit carryforwards of $3,221.
Valuation Allowances
The valuation allowances as of March 2, 2013 and March 3, 2012 apply to the net deferred tax
assets of the Company. The Company maintained a full valuation allowance of $2,223,675 and
$2,317,425 against net deferred tax assets at March 2, 2013 and March 3, 2012, respectively.
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