Unum 2012 Annual Report Download - page 134

Notes To Consolidated Financial Statements
132 UNUM 2012 ANNUAL REPORT
Our consolidated statements of income include the following changes in unrecognized tax benefits:
December 31
(in millions of dollars) 2012 2011 2010
Balance at Beginning of Year $ 86.9 $138.9 $ 146.8
Tax Positions Taken During Prior Years
Additions 13.3 4.4 3.6
Subtractions (0.6) (11.8) (11.5)
Settlements with Tax Authorities (23.5) (44.6) —
Lapses of Statute of Limitations (61.1) — —
Tax Positions Taken During Current Year 2.5 — —
Balance at End of Year 17.5 86.9 138.9
Less Tax Attributable to Temporary Items Included Above (15.0) (86.9) (123.7)
Total Unrecognized Tax Benefits that if Recognized
Would Affect the Effective Tax Rate $ 2 . 5 $ — $ 15.2
Included in the balances at December 31, 2012, 2011, and 2010 are $15.0 million, $86.9 million, and $123.7 million, respectively, of
unrecognized tax benefits for tax positions for which the ultimate deductibility is highly certain but for which there is uncertainty about the
timing of such deductibility. Other than potential interest and penalties, the disallowance of the shorter deductibility period would not
affect our results of operations but would accelerate the payment of cash to the taxing authority.
We recognize interest expense and penalties, if applicable, related to unrecognized tax benefits in tax expense net of federal income
tax. We recognized a reduction of interest expense associated with unrecognized tax benefits of $10.4 million and $13.1 million for 2012
and 2011, respectively. We recognized an increase in interest expense related to unrecognized tax expense of $5.5 million during 2010. The
total amounts of accrued interest and penalties related to unrecognized tax benefits in our consolidated balance sheets as of December 31,
2012, 2011, and 2010 were $1.9 million, $12.3 million, and $25.4 million, respectively. It is reasonably possible that unrecognized tax
benefits could decrease within the next 12 months by $0 to $10.0 million as a result of additional Internal Revenue Service (IRS)
settlements, advance payments of taxes, and claims for refund.
We file federal and state income tax returns in the United States and in foreign jurisdictions. We are under continuous examination
by the IRS with regard to our U.S. federal income tax returns. The IRS audit of our 2009 and 2010 years commenced in 2012. During 2012,
we also finalized all issues with the IRS related to our 2007 and 2008 years and recognized a reduction of our federal income taxes of
$11.0 million. During 2011, the Congressional Joint Committee on Taxation approved our final settlement with the IRS for tax years 1996 to
2004. The settlement resulted from our administrative appeal of audit adjustments relating primarily to insurance tax reserves and losses
incurred by foreign subsidiaries. As a result of the settlement, we recognized in our 2011 operating results a reduction in our federal income
taxes of $41.3 million as well as interest income of $17.5 million before tax and $11.4 million after tax. We received a cash refund of taxes
and interest under this settlement of $60.4 million in 2012.
During 2010, the IRS completed its examination of tax years 2005 and 2006 and issued a revenue agent’s report (RAR). In 2011, we
filed a protest to the RAR with respect to all significant adverse proposed adjustments. In 2012, we reached a tentative settlement with IRS
Appeals for these years and expect to receive final approval of the settlement in 2013, with no material impact on our results of operations
or financial condition.
Tax years subsequent to 2008 remain subject to examination by tax authorities in the U.S. and tax years subsequent to 2009 remain
subject to examination in major foreign jurisdictions. We believe sufficient provision has been made for all 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.