Unum 2013 Annual Report Download - page 138

136 / UNUM 2013 ANNUAL REPORT
Notes To Consolidated Financial Statements
We consider the unremitted earnings of our foreign operations to be permanently invested and therefore have not provided U.S. deferred
taxes on the cumulative earnings of our non-U.S. affiliates. Deferred taxes are provided for earnings of non-U.S. affiliates when we plan to
remit those earnings. As of December 31, 2013, we have not made a provision for U.S. taxes on approximately $1 billion of the excess of the
carrying amount for financial reporting over the tax basis of investments in foreign subsidiaries that are essentially permanent in duration.
The determination of a deferred tax liability related to investments in these foreign subsidiaries is not practicable.
Our consolidated statements of income include the following changes in unrecognized tax benefits:
December 31
(in millions of dollars) 2013 2012 2011
Balance at Beginning of Year $ 17.5 $ 86.9 $138.9
Tax Positions Taken During Prior Years
Additions 5.7 13.3 4.4
Subtractions — (0.6) (11.8)
Settlements with Tax Authorities (4.8) (23.5) (44.6)
Lapses of Statute of Limitations — (61.1) —
Tax Positions Taken During Current Year — 2.5 —
Balance at End of Year 18.4 17.5 86.9
Less Tax Attributable to Temporary Items Included Above (10.2) (15.0) (86.9)
Total Unrecognized Tax Benefits that if Recognized
Would Affect the Effective Tax Rate $ 8.2 $ 2.5 $ —
Included in the balances at December 31, 2013, 2012, and 2011 are $10.2 million, $15.0 million, and $86.9 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 $1.1 million, $10.4 million, and $13.1 million
for 2013, 2012, and 2011, respectively. The total amounts of accrued interest and penalties related to unrecognized tax benefits in our
consolidated balance sheets as of December 31, 2013 and 2012 were $0.8 million and $1.9 million, respectively. It is reasonably possible
that unrecognized tax benefits could decrease within the next 12 months by $0 to $8.0 million pending resolution of items with the Internal
Revenue Service (IRS).
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. During 2013, our appeal of tax years 2005 and 2006 was effectively settled with
the approval of the Congressional Joint Committee on Taxation. As a result of the settlement, we recognized in our 2013 operating results a
reduction in federal income taxes of $1.4 million as well as other income of $4.0 million before tax and $2.6 million after tax. We expect to
receive a cash refund of taxes and interest under this settlement of approximately $17.5 million in 2014.
During 2012, the IRS audit of our 2009 and 2010 years commenced, and we also finalized all issues with the IRS related to our 2007
and 2008 years resulting in a reduction of our federal income taxes of $11.0 million. During 2011, the IRS approved our final settlement 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.