Travelzoo 2013 Annual Report Download - page 102

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67
The Company maintains liabilities for uncertain tax positions. To the extent accrued interest and penalties do not
ultimately become payable, amounts accrued will be reduced and reflected as a reduction in the overall income tax provision in
the period that such determination is made. At December 31, 2013, the Company had approximately $9.3 million in total
unrecognized tax benefits, approximately $1.0 million in accrued interest, of which $432,000 was accrued in 2013, and
approximately $80,000 in accrued penalties, of which none was accrued in 2013. Unrecognized tax benefits of approximately
$7.9 million which, if recognized, would favorably affect the Company’s effective income tax rate, and unrecognized tax
benefits of approximately $1.4 million which if recognized, would be recorded in discontinued operations. The increase in the
unrecognized tax benefit for the year ended December 31, 2012 was related to a deduction taken on the Company's 2011 U.S.
federal and state income tax returns for the $20.0 million settlement with the State of Delaware. A reconciliation of the
beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
Unrecognized tax benefits balance at January 1, 2011 $ 1,366
Increase related to prior year tax positions 510
Decrease related to prior year tax positions —
Increase related to current year tax positions —
Settlements (42)
Lapse of statute of limitations —
Unrecognized tax benefits balance at December 31, 2011 1,834
Increase related to prior year tax positions 47
Decrease related to prior year tax positions (9)
Increase related to current year tax positions 7,851
Settlements (251)
Lapse of statute of limitations (107)
Unrecognized tax benefits balance at December 31, 2012 9,365
Increase related to prior year tax positions —
Decrease related to prior year tax positions —
Increase related to current year tax positions 38
Settlements (58)
Lapse of statute of limitations —
Unrecognized tax benefits balance at December 31, 2013 $ 9,345
The Company is in various stages of multiple year examinations by federal taxing authorities. Although the timing of
resolution and/or closure on audits is highly uncertain, it is reasonably possible that the balance of the gross unrecognized tax
benefits related to the method of computing income taxes in certain jurisdiction and losses reported on certain income tax
returns could significantly change in the next 12 months. These changes may occur through settlement with the taxing
authorities or the expiration of the statute of limitations on the returns filed. The Company is unable to estimate the range of
possible adjustments to the balance of the gross unrecognized tax benefits.
The Company files income tax returns in the U.S. federal jurisdiction and various states and foreign jurisdictions. The
Company is subject to U.S. federal and certain state tax examinations for years after 2009 and is subject to California tax
examinations for years after 2005. The Company's 2009 and 2010 federal income returns are currently under examination,
including a review of the impact of the sale of Asia Pacific business segment in 2009.