Unum 2006 Annual Report Download - page 149

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
Unum Group and Subsidiaries
131
Note 8 - Income Tax - Continued
Our consolidated statements of operations include the following amounts of income subject to foreign taxation,
including the results of the Canadian branch discontinued operations, and the related foreign income tax expense
(benefit):
2006 2005 2004
$ 229.6 $ 179.8 $ 61.7
Current $ 43.9 $ 50.3 $ 75.5
Deferred (65.2) 0.6 (69.6)
$ (21.3) $ 50.9 $ 5.9 Total Foreign Income Tax Expense (Benefit)
Foreign Income Tax Expense (Benefit)
Year Ended December 31
(in millions of dollars)
Income Before Tax Sub
j
ect to Forei
g
n Taxation
During the fourth quarter of 2006, we reversed income tax liabilities of approximately $91.9 million related
primarily to group relief benefits obtained from the use of net operating losses in a foreign jurisdiction in which our
businesses operate as the result of final determinations on those years. Included also in fourth quarter 2006
operating results is income of $2.6 million before tax and approximately $3.9 million after tax attributable to the
receipt of interest and tax refunds on prior year tax items in excess of what was previously provided.
During the first quarter of 2005, the Internal Revenue Service (IRS) completed its examination of tax years 1999
through 2001 and issued its revenue agent’s report (RAR) in April 2005. Income tax liabilities of approximately
$32.0 million that related primarily to interest on the timing of expense deductions were released in the first quarter
of 2005, all of which was reflected as a reduction to income tax expense. We are contesting several issues raised in
the 1999 through 2001 tax years and expect to resolve these through the IRS appeals process.
During 2005, we also recognized $3.0 million of income before tax and $2.0 million after tax as a result of refunds
received from the IRS during the year. Additionally, we recognized an income tax benefit of approximately $10.8
million in connection with the finalization of income tax reviews of our U.K. subsidiaries.
During 2004, we obtained a judgment in refund litigation for tax year 1984, and as a result we were entitled to a
refund of tax plus interest for 1984 and for tax years subsequent to 1984 in which the IRS took inconsistent positions
on the deductibility of the insurance tax reserves that were the subject of the litigation and for which we paid tax
based on the IRS’ positions. As a result of the judgment, results from operations were increased by $14.0 million
before tax and $26.2 million after tax.
Also during 2004, we recognized tax benefits from settlements of IRS examinations of tax years 1996 through 1998.
Under the settlements, we resolved issues raised by the IRS pertaining to the calculation of insurance tax reserves
and the deductibility of losses on notional principal contracts. Tax benefits of $33.1 million are included in 2004
results from operations attributable to the effect of prior year tax settlements.
We are under continuous examination by the IRS and other tax authorities in areas wherein we have significant
business operations. The current IRS examination covers the tax years 2002 through 2004.
We believe sufficient provision has been made for proposed and potential adjustments for years under examination
and at appeals and for years yet to be examined. We do not believe that any such future adjustment will have a
material adverse effect on our financial position, liquidity, or results of operations, although the resolution of income
tax matters could impact our results of operations for a particular period.