Washington Post 2014 Annual Report Download - page 89

For U.S. Federal income tax purposes, the Company has $0.8 million
of foreign tax credits available to be credited against future U.S.
Federal income tax liabilities. These U.S. Federal foreign tax credits
are expected to be fully utilized in the future; if unutilized, these foreign
tax credits will expire in 2023. The Company has established at
December 31, 2014, $0.8 million of U.S. Federal deferred tax assets
with respect to these U.S. Federal foreign tax credit carryforwards.
The Company has $104.3 million of non-U.S. income tax loss
carryforwards, as a result of operating losses and prior stock
acquisitions that are available to offset future non-U.S. taxable income
and has recorded, with respect to these losses, $30.5 million in non-
U.S. deferred income tax assets. The Company has established
$29.2 million in valuation allowances against the deferred tax assets
recorded for the portion of non-U.S. tax losses that may not be fully
utilized to reduce future non-U.S. taxable income. The $104.3 million
of non-U.S. income tax loss carryforwards consist of $96.1 million in
losses that may be carried forward indefinitely; $1.6 million of losses
that, if unutilized, will expire in varying amounts through 2019; and
$6.6 million of losses that, if unutilized, will start to expire after 2019.
Deferred tax valuation allowances and changes in deferred tax
valuation allowances were as follows:
(in thousands)
Balance at
Beginning of
Period
Tax
Expense and
Revaluation Deductions
Balance at
End of
Period
Year ended
December 31, 2014 ... $72,767 $ 889 — $73,656
December 31, 2013 . . . $78,109 $ (5,342) — $72,767
December 31, 2012 . . . $59,179 $18,930 — $78,109
The Company has established $38.8 million in valuation allowances
against deferred state tax assets recognized, net of U.S. Federal tax.
As stated above, approximately $26.1 million of the valuation
allowances, net of U.S. Federal income tax, relate to state income
tax loss carryforwards. The Company has established valuation
allowances against state income tax assets recognized, without
considering potentially offsetting deferred tax liabilities established
with respect to prepaid pension cost and goodwill. Prepaid pension
cost and goodwill have not been considered a source of future
taxable income for realizing deferred tax assets recognized since
these temporary differences are not likely to reverse in the foreseeable
future. The valuation allowances established against state income tax
assets are recorded at the parent company and the education
division and may increase or decrease within the next 12 months,
based on operating results or the market value of investment holdings.
As a result, the Company is unable to estimate the potential tax
impact, given the uncertain operating and market environment. The
Company will be monitoring future operating results and projected
future operating results on a quarterly basis to determine whether the
valuation allowances provided against deferred state tax assets
should be increased or decreased, as future circumstances warrant.
The Company has not established valuation allowances against any
U.S. Federal deferred tax assets.
The Company has established $34.9 million in valuation
allowances against non-U.S. deferred tax assets, and, as stated
above, $29.2 million of the non-U.S. valuation allowances relate to
non-U.S. income tax loss carryforwards.
Deferred U.S. Federal and state income taxes are recorded with
respect to undistributed earnings of investments in non-U.S.
subsidiaries to the extent taxable dividend income would be
recognized if such earnings were distributed. Deferred income taxes
recorded with respect to undistributed earnings of investments in non-
U.S. subsidiaries are recorded net of foreign tax credits with respect
to such undistributed earnings estimated to be creditable against
future U.S. Federal tax liabilities. At December 31, 2014 and
2013, net U.S. Federal and state deferred income tax liabilities of
about $10.6 million and $7.7 million, respectively, were recorded
with respect to undistributed earnings of investments in non-U.S.
subsidiaries based on the year-end position.
Deferred U.S. Federal and state income taxes have not been recorded
for the full book value and tax basis differences related to investments
in non-U.S. subsidiaries because such investments are expected to be
indefinitely held. The book value exceeded the tax basis of investments
in non-U.S. subsidiaries by approximately $57.9 million and $66.8
million at December 31, 2014 and 2013, respectively; these
differences would result in approximately $1.4 million and $5.9
million of net additional U.S. Federal and state deferred tax liabilities,
net of foreign tax credits related to undistributed earnings and
estimated to be creditable against future U.S. Federal tax liabilities, at
December 31, 2014 and 2013, respectively. If investments in non-
U.S. subsidiaries were held for sale instead of expected to be held
indefinitely, additional U.S. Federal and state deferred tax liabilities
would be required to be recorded, and such deferred tax liabilities, if
recorded, may exceed the above estimates.
The Company does not currently anticipate that within the next 12
months there will be any events requiring the establishment of any
valuation allowances against U.S. Federal net deferred tax assets.
The valuation allowances established against non-U.S. deferred tax
assets are recorded at the education division, as this is the only
division with significant non-U.S operating activities, and these are
largely related to the education division’s operations in Australia.
These valuation allowances may increase or decrease within the
next 12 months, based on operating results. As a result, the
Company is unable to estimate the potential tax impact, given the
uncertain operating environment. The Company will be monitoring
future education division operating results and projected future
operating results on a quarterly basis to determine whether the
valuation allowances provided against non-U.S. deferred tax assets
should be increased or decreased, as future circumstances warrant.
The Company recorded a $10.5 million U.S. Federal income tax
receivable at December 31, 2013, with respect to capital loss and
foreign tax credit carrybacks to the 2010 tax year. The Company files
income tax returns with the U.S. Federal government and in various state,
local and non-U.S. governmental jurisdictions, with the consolidated U.S.
Federal tax return filing considered the only major tax jurisdiction. The
statute of limitations has expired on all consolidated U.S. Federal
corporate income tax returns filed through 2009. The Internal Revenue
Service is currently examining the 2010 carryback claim discussed
above, and the IRS has indicated they may examine subsequent tax
years once the examination of the carryback claim is completed.
The Company endeavors to comply with tax laws and regulations
where it does business, but cannot guarantee that, if challenged,
the Company’s interpretation of all relevant tax laws and regulations
will prevail and that all tax benefits recorded in the financial
statements will ultimately be recognized in full.
2014 FORM 10-K 73