LabCorp 2015 Annual Report Download - page 108

Index
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
A portion of the tax benefit associated with option exercises from stock plans reducing taxes currently payable is recorded through additional paid-in
capital. The benefits recorded through additional paid-in capital are approximately $13.1, $5.9 and $10.6 in 2015, 2014 and 2013, respectively.
The effective tax rates on earnings before income taxes are reconciled to statutory U.S. income tax rates as follows:
Years Ended December 31,
2015
2014
2013
Statutory U.S. rate 35.0 %
35.0%
35.0 %
State and local income taxes, net of U.S. income tax effect 3.2
2.7
2.6
Foreign earnings taxes at lower rates than the statutory U.S. rate (1.8)
—
—
One-time restructuring and acquisition items 2.7
—
—
Other 1.1
0.3
(0.4)
Effective rate 40.2 %
38.0%
37.2 %
The effective rate for 2015 was unfavorably impacted by one-time restructuring and acquisition items, recording of additional uncertain tax reserves, and
a decrease in the benefit recorded from releasing uncertain tax reserves. The 2015 rate was favorably impacted by foreign earnings taxed at rates lower than
the U.S. statutory rate.
The effective rate for 2014 was unfavorably impacted by the recording of a full valuation allowance for the write down of two of the Company's
investments.
The effective rate for 2013 was favorably impacted by the release of the capital loss valuation allowance and recording two years of the R&D tax credit.
The American Taxpayer Relief Act of 2012 was enacted in early 2013 and reinstated the R&D tax credit for 2012 and extended the credit for calendar year
2013.
The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are as follows:
December 31, 2015
December 31, 2014
Deferred tax assets:
Accounts receivable $ 13.4
$ 12.9
Employee compensation and benefits 140.6
110.7
Self insurance reserves 36.9
27.6
Postretirement benefit obligation 7.5
10.2
Acquisition and restructuring reserves 24.5
20.1
Tax loss carryforwards 98.3
69.1
Other 4.3
2.4
325.5
253.0
Less: valuation allowance (15.1)
(17.1)
Net deferred tax assets $ 310.4
$ 235.9
Deferred tax liabilities:
Deferred earnings $ (189.5)
$ (15.8)
Intangible assets (979.2)
(496.3)
Property, plant and equipment (211.9)
(93.5)
Zero-coupon subordinated notes (87.4)
(92.8)
Currency translation adjustment (47.3)
(48.7)
Total gross deferred tax liabilities (1,515.3)
(747.1)
Net deferred tax liabilities $ (1,204.9)
$ (511.2)
The valuation allowance decreased from $17.1 in 2014 to $15.1 in 2015. The decrease in the valuation allowance is primarily due to releasing an
allowance for capital loss carryover as the Company recorded capital gain income during 2015.
The Company has foreign tax loss carryovers of $39.5 of which $27.4 has a full valuation allowance. Most of the foreign losses have an indefinite
carryover. The Company has U.S. tax loss carryovers of approximately $245.0 expiring periodically
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