Unum 2015 Annual Report Download - page 136

Notes To Consolidated Financial Statements
134 Unum 2015 Annual Report
The U.K. government enacted income tax rate reductions during 2015 and 2013. During 2015, the rate was reduced from 20 percent
to 19 percent effective April 2017, and to 18 percent effective April 2020. During 2013, the rate was reduced from 23 percent to 21 percent
effective April 2014, and to 20 percent effective April 2015. Although the rate reductions in each instance became or will become effective
during a subsequent year, we are required to adjust deferred tax assets and liabilities through income on the date of enactment of a rate
change. As a result, we recorded income tax benefits of $6.5 million and $6.3 million for the tax rate reductions enacted during 2015 and
2013, respectively.
We have not provided U.S. deferred taxes on the cumulative earnings of our non-U.S. subsidiaries. We consider these unremitted
earnings to be permanently invested as they relate to ongoing operations of our non-U.S. subsidiaries. We do not intend to repatriate
these earnings to fund our U.S. operations as we expect that future domestic cash flow generation will be sufficient to meet future
domestic cash needs. As of December 31, 2015, we had not recorded a deferred tax liability on approximately $1 billion of the excess of
the carrying amount for financial reporting over the tax basis of investments in non-U.S. subsidiaries that is considered permanent in
duration. This amount becomes taxable upon repatriation of assets from a foreign subsidiary or a sale or liquidation of foreign subsidiaries.
Should we sell the stock in our non-U.S. subsidiaries for an amount equal to the carrying amount for financial reporting, we would
recognize tax expense of approximately $200 million, assuming our ability to fully utilize foreign tax credits.
Our consolidated statements of income include the following changes in unrecognized tax benefits:
December 31
(in millions of dollars) 2015 2014 2013
Balance at Beginning of Year $ 19.8 $ 18.4 $ 17.5
Additions to Tax Positions Taken During Prior Years — 1.7 5.7
Settlements with Tax Authorities (19.0) (0.6) (4.8)
Tax Positions Taken During Current Year — 0.3 —
Balance at End of Year 0.8 19.8 18.4
Less Tax Attributable to Temporary Items Included Above — (10.4) (10.2)
Total Unrecognized Tax Benefits That if Recognized
Would Affect the Effective Tax Rate $ 0.8 $ 9.4 $ 8.2
Included in the balances at December 31, 2014 and 2013 were $10.4 million and $10.2 million, respectively, of unrecognized tax
benefits for tax positions for which the ultimate deductibility was highly certain but for which there was uncertainty about the timing of
such deductibility. Other than potential interest and penalties, the disallowance of the shorter deductibility period would not have affected
our results of operations but would have accelerated 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 an increase (reduction) in interest expense related to unrecognized tax benefits of $(1.0) million, $0.2 million, and
$(1.1) million during 2015, 2014, and 2013, respectively. We held a de minimis liability in our consolidated balance sheets for accrued
interest and penalties related to unrecognized tax benefits at December 31, 2015. At December 31, 2014, we held a liability of $1.0 million.
There are no positions for which it is reasonably possible that unrecognized tax benefits could materially increase or decrease within the
next 12 months.
We file federal and state income tax returns in the United States and in foreign jurisdictions. We have been under continuous
examination by the Internal Revenue Service (IRS) with regard to our U.S. federal income tax returns. During 2015, we settled our IRS audit
for 2009 and 2010 and resolved a claim for refund we filed related to tax credits for years 2003 through 2012. As a result, we recognized a
tax benefit of $6.8 million in our consolidated statements of income and paid an immaterial amount of additional tax.
Tax years subsequent to 2010 remain subject to examination by tax authorities in the U.S., and tax years subsequent to 2013 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.