Wendy's 2009 Annual Report Download - page 115

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A reconciliation of the difference between the reported benefit from (provision for) income taxes and the
respective benefit (tax) that would result from applying the 35% U.S. Federal statutory rate to the (loss)
income from continuing operations before income taxes is as follows:
2009 2008 2007
Income tax benefit (provision) computed at U.S. Federal
statutory rate............................................. $ 7,047 $203,438 $(2,356)
State income taxes, net of U.S. Federal income tax effect . . . 2,505 6,884 (191)
Previously unrecognized state net operating losses, net of
related valuation allowance (a) . . . . . . . . . . . . . . . . . . . . . . . . . 9,629 — —
Foreign tax credits, net of tax on foreign earnings (b). . . . . . — 9,241 —
Impairment of non-deductible goodwill. . . . . . . . . . . . . . . . . . . — (99,696) —
Canadian tax rate changes............................... 2,000 — —
Non-controlling interests . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (10) (119) (939)
Loss on DFR common stock with no tax benefit . . . . . . . . . . — (20,259) —
Jobs tax credits, net .................................... 3,792 1,805 —
Valuation allowance reductions. . . . . . . . . . . . . . . . . . . . . . . . . . . 1,165 — —
Non-deductible expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,354) (1,921) (2,338)
Adjustments related to prior year tax matters . . . . . . . . . . . . . (1,603) (706) 2,574
Previously unrecognized contingent benefit (c) . . . . . . . . . . . . — — 12,488
Other, net............................................. 478 627 (884)
$23,649 $ 99,294 $ 8,354
(a) In connection with the fourth quarter 2009 dissolution of our captive insurance company, the likelihood of
realization of certain previously unrecognized state net operating losses is no longer remote. Accordingly,
an $18,152 deferred tax asset and related $8,523 partial valuation allowance was recognized.
(b) Includes previously unrecognized benefit in 2008 of foreign tax credits, net of foreign income and
withholding taxes, on $23,985 repatriation of foreign earnings.
(c) Represents a previously unrecognized contingent tax benefit related to two related party deferred
compensation trusts.
The Internal Revenue Service (“IRS”) is conducting an examination of the Company’s 2010 and 2009 U.S.
Federal income tax years as part of the Compliance Assurance Process (“CAP”). As part of CAP, tax years are
audited on a contemporaneous basis so that all or most issues are resolved prior to the filing of the tax return.
Wendy’s has been participating in CAP since its 2006 tax year. The Wendy’s federal income tax returns for
2007 and prior years have been settled. The Company participated in CAP beginning with the tax period
ended December 28, 2008 and this return is settled. Our December 28, 2008 U.S. Federal income tax return
includes Wendy’s for all of 2008 and Wendy’s/Arby’s for the period September 30, 2008 to December 28,
2008. Wendy’s/Arby’s U.S. Federal income tax returns for 2005 to September 29, 2008 are not currently under
examination.
Certain of the Company’s state income tax returns from its 2001 fiscal year and forward remain subject to
examination. Various state income tax returns are currently under examination.
108
Wendy’s/Arby’s Group, Inc. and Subsidiaries
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(In Thousands Except Per Share Amounts)