Sprint - Nextel 2008 Annual Report Download - page 96

SPRINT NEXTEL CORPORATION
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:
2009 2008
(in millions)
Balance at January 1 ........................................... $449 $654
Additions based on current year tax positions ......................... 3 9
Additions based on prior year tax positions .......................... 7 38
Reductions for prior year tax positions .............................. (37) (18)
Reductions for settlements ........................................ (129) (109)
Reductions for lapse of statute of limitations ......................... (9) (125)
Balance at December 31 ........................................ $284 $449
The 2009 reduction in unrecognized tax benefits was principally attributable to income tax settlements
with the U.S. federal jurisdiction. We file income tax returns in the U.S. federal jurisdiction and each state
jurisdiction which imposes an income tax. We also file income tax returns in a number of foreign jurisdictions.
However, our foreign income tax activity has been immaterial. The Internal Revenue Service (IRS) is currently
conducting an examination of our 2007 and 2008 consolidated income tax returns. They have completed the
examination of our consolidated returns for years prior to 2007. We have reached settlement agreements with the
Appeals division of the IRS for examination issues in dispute for years prior to 2005 with the exception of one
issue which is immaterial to our consolidated financial position and results of operations. Resolution of the 2005
and 2006 disputed issues with the Appeals division of the IRS may be reached during the next 12 months;
however, they are immaterial to our consolidated financial position and results of operations.
The disputed issues from the 2001 through pre-merger 2005 consolidated income tax returns of our
subsidiary Nextel Communications, Inc. were resolved with the Appeals division and are immaterial to our
consolidated financial position and results of operations. In addition, we are involved in multiple state income tax
examinations related to various years beginning with 1996, which are in various stages of the examination,
administrative review or appellate process. Based on our current knowledge of the examinations, administrative
reviews and appellate processes, we believe it is reasonably possible many of our uncertain tax positions may be
resolved during the next twelve months which could result in a reduction of up to approximately $100 million in
our unrecognized tax benefits.
Note 12. Commitments and Contingencies
Litigation, Claims and Assessments
A number of cases that allege Sprint Communications Company L.P. failed to obtain easements from
property owners during the installation of its fiber optic network in the 1980’s have been filed in various courts.
Several of these cases sought certification of nationwide classes, and in one case, a nationwide class was
certified. In 2003, a nationwide settlement of these claims was approved by the U.S. District Court for the
Northern District of Illinois, but objectors appealed the preliminary approval order to the Seventh Circuit Court
of Appeals, which overturned the settlement and remanded the case to the trial court for further proceedings. The
parties proceeded with litigation and/or settlement negotiations on a state by state basis, and settlement
negotiations have been coordinated in all cases but those pending in Louisiana and Tennessee. The Louisiana
claims have been separately settled for an amount not material to our consolidated financial position or results of
operations, and that settlement was given final approval by the Court, and the time to appeal that approval has
expired. We reached an agreement in principle to settle the claims in all the other states, excluding Tennessee, for
an amount not material to our consolidated financial position or results of operations. The Court issued its
preliminary approval of the settlement on July 17, 2008, but on September 10, 2009, the Court announced that it
would not approve the settlement. The Court did not decide whether the settlement was fair or in the best interest
of class members, but denied on jurisdictional grounds. As a result, the agreement terminated, and the Company
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