Unum 2010 Annual Report Download - page 130

Notes To Consolidated Financial Statements
128
Unum
2010
We recognize interest expense and penalties, if applicable, related to unrecognized tax benefits in tax expense net of federal income
tax. The total amounts of accrued interest and penalties in our consolidated balance sheets as of December 31, 2010, 2009, and 2008 are
$25.4 million, $19.9 million, and $13.4 million, respectively. We recognized interest related to unrecognized tax expense in our consolidated
statements of income of $5.5 million, $6.5 million, and $5.9 million during 2010, 2009, and 2008, respectively. There were no changes to
our uncertain tax positions as a result of settlements or lapses in statutes of limitations during 2010, 2009, and 2008.
We file federal and state income tax returns in the United States and in foreign jurisdictions. We are under continuous examination by
the Internal Revenue Service (IRS) with regard to our U.S. federal income tax returns. During 2010, the IRS completed its examination of tax
years 2005 and 2006 and issued its revenue agent’s report (RAR) in December 2010. In January 2011, we filed a protest to the RAR with
respect to all significant adverse proposed adjustments. During 2008, the IRS completed its examination of tax years 2002 through 2004
and issued its RAR. We filed a protest to the RAR in 2008 with respect to all significant adverse proposed adjustments.
During 2009, we had a conference with the IRS with respect to our appeal of IRS audit adjustments for the years 1999 to 2004.
Although we have not yet reached a final settlement with the IRS for these years, it is reasonably possible that this appeal will be resolved
in whole or in part within 12 months and that statutes of limitations may expire in multiple jurisdictions within the same period. As a result,
it is reasonably possible that our liability for unrecognized tax benefits could decrease within 12 months by $0 to $40.0 million. We believe
sufficient provision has been made for all uncertain tax positions and that any adjustments by tax authorities with respect to such positions
would not have a material adverse effect on our financial position, liquidity, or results of operations.
Tax years subsequent to 2006 remain subject to examination by tax authorities in the U.S. Tax years subsequent to 2008 remain
subject to examination in major foreign jurisdictions. We believe sufficient provision has been made for all proposed and potential
adjustments for years that are not closed by the statute of limitations in all major tax jurisdictions and that any such adjustments would not
have a material adverse effect on our financial position, liquidity, or results of operations. However, it is possible that the resolution of
income tax matters could produce quarterly volatility in our results of operations in future periods.
In March 2010, the Patient Protection and Affordable Care Act and the Health Care and Education Reconciliation Act of 2010 were
signed into law. Among other things, the new legislation reduces the tax benefits available to an employer that receives a postretirement
prescription drug coverage subsidy from the federal government under the Medicare Prescription Drug, Improvement and Modernization
Act of 2003. Under the new legislation, to the extent our future postretirement prescription drug coverage expenses are reimbursed under
the subsidy program, the expenses covered by the subsidy will no longer be tax deductible after 2012. Employers that receive the subsidy
must recognize the deferred tax effects relating to the future postretirement prescription drug coverage in the period the legislation was
enacted. Our income tax expense for the year ended December 31, 2010 includes a non-cash tax charge of $10.2 million which was
recorded in the rst quarter of 2010 to reect the impact of the tax law change.
Included in 2009 operating results is a refund of interest of $0.3 million before tax and $0.2 million after tax attributable to tax year
1998. Included in 2008 operating results is a refund of interest of $7.6 million before tax and $4.9 million after tax primarily attributable to
tax years 1986 through 1996.
As of December 31, 2010, we had no net operating loss carryforward in the U.S. We held a valuation allowance of $4.1 million related
to basis differences in foreign subsidiaries and net operating loss carryforwards in foreign jurisdictions because, in our judgment, we will
most likely not realize a tax benefit for these amounts. The $0.1 million decrease in the valuation allowance during 2010 is due to the
uctuation in the British pound sterling to dollar exchange rate.
Total income taxes paid net of refunds during 2010, 2009, and 2008 were $273.0 million, $381.6 million, and $369.0 million, respectively.