Sysco 2015 Annual Report Download - page 84
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Please find page 84 of the 2015 Sysco annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.SYSCO CORPORATION-Form10-K76
PARTII
ITEM8Financial Statements and Supplementary Data
The effective tax rate of 36.9% for scal 2014 was negatively impacted primarily by two items. First, a non-deductible penalty, that the company incurred,
had an unfavorable tax impact of $6.2 million. Second, we recorded net tax expense of $5.2 million for tax and interest related to various federal, foreign and
state uncertain tax positions. This negative impact was partially offset by the recording of $5.7 million of tax bene t related to disqualifying dispositions of
Sysco stock pursuant to share-based compensation arrangements. Inde nitely reinvested earnings taxed at foreign statutory rates less than our domestic
tax rate also had the impact of reducing the effective tax rate.
The effective tax rate for scal 2013 was 35.9%. Inde nitely reinvested earnings taxed at foreign statutory tax rates that are lower than our domestic tax
rate had the impact of reducing the effective tax rate.
Uncertain Tax Positions
A reconciliation of the beginning and ending amount of gross unrecognized tax bene ts, excluding interest and penalties, is as follows:
(Inthousands)
2015 2014
Unrecognized tax bene ts at beginning of year $ 49,180 $ 108,337
Additions for tax positions related to prior years 797 2,128
Reductions for tax positions related to prior years (8,001) (41,802)
Reductions due to settlements with taxing authorities (4,430) (19,483)
UNRECOGNIZED TAX BENEFITS AT END OF YEAR $ 37,546 $ 49,180
As of June 27, 2015, the gross amount of liability for accrued interest and penalties related to unrecognized tax bene ts was $33.4 million. The expense
recorded for interest and penalties related to unrecognized tax bene ts in scal 2015 was not material.
As of June 28, 2014, the gross amount of liability for accrued interest and penalties related to unrecognized tax bene ts was $36.7 million. The expense
recorded for interest and penalties related to unrecognized tax bene ts in scal 2014 was $14.8 million. In the fourth quarter of scal 2014, we reclassi ed
a receivable that would arise upon the resolution of an unrecognized tax bene t from a gross position in other assets to a net position in other long-term
liabilities on our consolidated balance sheet due to a change in circumstances related to transfer pricing positions.
If Sysco were to recognize all unrecognized tax bene ts recorded as of June 27, 2015, approximately $27.7 million of the $37.5 million reserve would
reduce the effective tax rate. If Sysco were to recognize all unrecognized tax bene ts recorded as of June 28, 2014, approximately $35.1 million of the
$49.2 million reserve would reduce the effective tax rate. It is reasonably possible that the amount of the unrecognized tax bene ts with respect to certain
of the company’s unrecognized tax positions will increase or decrease in the next twelve months either because Sysco’s positions are sustained on audit
or because the company agrees to their disallowance. Items that may cause changes to unrecognized tax bene ts primarily include the consideration of
various ling requirements in various states and the allocation of income and expense between tax jurisdictions. In addition, the amount of unrecognized tax
bene ts recognized within the next twelve months may decrease due to the expiration of the statute of limitations for certain years in various jurisdictions;
however, it is possible that a jurisdiction may open an audit on one of these years prior to the statute of limitations expiring. At this time, an estimate of the
range of the reasonably possible change cannot be made.
The IRS has open audits for Sysco’s 2006, 2007, 2008 and 2009 federal income tax returns. As of June 27, 2015, Sysco’s tax returns in the majority of
the state and local jurisdictions and Canada are no longer subject to audit for the years before 2009. However, in Canada, the company remains open to
transfer pricing adjustments back to 2003 for some entities. Certain tax jurisdictions require partial to full payment on audit assessments or the posting of
letters of credit in order to proceed to the appeals process. Although the outcome of tax audits is generally uncertain, the company believes that adequate
amounts of tax, including interest and penalties, have been accrued for any adjustments that may result from those open years.
Other
Undistributed income of certain consolidated foreign subsidiaries at June 27, 2015 amounted to $1.1 billion for which no deferred U.S. income tax provision
has been recorded because Sysco intends to permanently reinvest such income in those foreign operations. An estimate of any U.S. income or foreign
withholding taxes that may be applicable upon actual or deemed repatriation is not practical due to the complexities associated with the hypothetical
calculation.