Travelzoo 2014 Annual Report Download - page 105

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70
The Company maintains liabilities for uncertain tax positions. The Company’s policy is to include interest and penalties
related to unrecognized tax positions in income tax expense. 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, 2014, the Company had approximately $9.4 million in total unrecognized tax
benefits, approximately $1.5 million in accrued interest, of which $462,000 was accrued in 2014, and approximately $80,000 in
accrued penalties, of which none was accrued in 2014. Unrecognized tax benefits of approximately $8.0 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, 2012 $ 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
Increase related to prior year tax positions —
Decrease related to prior year tax positions —
Increase related to current year tax positions 38
Settlements —
Lapse of statute of limitations —
Unrecognized tax benefits balance at December 31, 2014 $ 9,383
The Company is in various stages of multiple year examinations by federal taxing authorities. Although the timing of
initiation, resolution and/or closure of 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 jurisdictions and losses reported on
certain income tax returns could significantly change in the next 12 months, including the $7.9 million unrecognized tax benefit
related to the Company's 2011 settlement with the State of Delaware. 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.