ServiceMagic 2010 Annual Report Download - page 78

Table of Contents
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 4—INCOME TAXES (Continued)
No federal and state income taxes have been provided on permanently reinvested earnings of certain foreign subsidiaries aggregating
$75.8 million at December 31, 2010. The amount of the unrecognized deferred U.S. income tax liability with respect to such earnings is
$18.6 million.
A reconciliation of the beginning and ending amount of unrecognized tax benefits, excluding interest, is as follows:
At December 31, 2010 and 2009, unrecognized tax benefits, including interest, were $487.6 million and $462.9 million, respectively. The
total unrecognized tax benefits as of December 31, 2010 include $11.9 million that have been netted against the related deferred tax assets. The
remaining balance of $475.7 million is reflected in "non-current income taxes payable". Unrecognized tax benefits for the year ended
December 31, 2010 decreased by $4.4 million due principally to a net decrease in deductible temporary differences and decreases in reserves
established in prior years for statute lapses, partially offset by an increase in reserves related to research credits. Included in unrecognized tax
benefits at December 31, 2010 is $101.7 million for tax positions which the ultimate deductibility is highly certain but for which there is
uncertainty about the timing of such deductibility. If unrecognized tax benefits as of December 31, 2010 are subsequently recognized,
$103.1 million and $206.9 million, net of related deferred tax assets and interest, would reduce income tax expense from continuing operations
and discontinued operations, respectively. If unrecognized tax benefits as of December 31, 2009 are subsequently recognized, $94.3 million and
$191.8 million, net of related deferred tax assets and interest, would reduce income tax expense from continuing operations and discontinued
operations, respectively. In addition, a continuing operations tax provision of $3.8 million would be required upon the subsequent recognition of
unrecognized tax benefits for an increase in the Company's valuation allowance against certain deferred tax assets.
The Company recognizes interest and, if applicable, penalties related to unrecognized tax benefits in income tax expense. Included in
income tax expense from continuing operations for the years ended December 31, 2010, 2009 and 2008 is a $9.1 million, $8.3 million and
$8.4 million expense, respectively, net of related deferred taxes of $5.8 million, $5.5 million and $5.7 million, respectively, for interest on
unrecognized tax benefits. Included in income tax expense from discontinued operations for the years ended December 31, 2010, 2009, and 2008
is a $7.0 million, $3.7 million and $(1.8) million expense (benefit), respectively, net of related deferred taxes of $4.4 million, $2.5 million and
$0.9 million, respectively, for interest on unrecognized tax benefits. At December 31, 2010 and 2009, the Company has accrued $97.7 million
and $68.7 million, respectively, for the payment of interest. Included in the
73
December 31,
2010 2009 2008
(In thousands)
Balance at beginning of
year
$
394,294
$
372,633
$
245,168
Additions based on tax
positions related to the
current year
3,060
2,333
158,242
Additions for tax positions
of prior years
9,897
35,432
11,761
Reductions for tax positions
of prior years
(13,164
)
(14,991
)
(13,704
)
Settlements
(1,025
)
(1,113
)
(26,304
)
Expiration of applicable
statute of limitations
(3,153
)
—
(
2,530
)
Balance at end of year
$
389,909
$
394,294
$
372,633