Windstream 2011 Annual Report Download - page 178

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
____
F-70
As discussed in Note 2, we adopted authoritative guidance for accounting for uncertainty in income taxes on January 1, 2007.
The adoption of this guidance resulted in no impact to either our reserves for uncertain tax positions or to retained earnings. A
reconciliation of the unrecognized tax benefits is as follows:
(Millions)
Beginning balance
Additions based on PAETEC acquisition
Additions based on Q-Comm acquisition
Additions based on D&E acquisition
Additions based on Lexcom acquisition
Additions based on NuVox acquisition
Additions based on tax positions of prior years
Reductions for tax positions of prior years
Reduction as a result of a lapse of the applicable statute of
limitations
Ending balance
2011
$ 18.6
0.5
0.6
—
—
—
—
—
(0.9)
$ 18.8
2010
$ 4.3
—
—
0.4
0.2
1.8
15.7
(0.6)
(3.2)
$ 18.6
2009
$ 6.1
—
—
0.3
0.1
—
—
(0.8)
(1.4)
$ 4.3
We do not expect or anticipate a significant increase or decrease over the next twelve months in the unrecognized tax benefits
reported above. The total amount of unrecognized tax benefits, if recognized, that would affect the effective tax rate is $16.5
million (net of indirect benefits) for year ended December 31, 2011.
Included in the balance at December 31, 2011 and 2010, are $0.7 million and $0.8 million, respectively, of gross tax positions
for which the ultimate deductibility is highly certain but for which there is uncertainty about the timing of such deductibility.
Because of the impact of the deferred tax accounting, other than interest and penalties, the disallowance of the shorter
deductibility period would not affect the annual effective tax rate but would accelerate the payment of cash to the taxing
authority to an earlier period. These unrecognized tax benefits are included in other long-term liabilities in the accompanying
consolidated balance sheets for the years ended December 31, 2011 and 2010.
We file income tax returns in the U.S. federal jurisdiction and various states. With few exceptions, we are no longer subject to
U.S. federal, state and local income tax examinations by tax authorities for years prior to 2007. However, due to acquired net
operating losses, tax authorities have the ability to adjust those net operating losses related to closed years. We have identified
Arkansas, California, Florida, Georgia, Illinois, Iowa, Kentucky, Nebraska, New York, North Carolina, Pennsylvania, Texas
and Virginia as “major” state taxing jurisdictions.
We recognize accrued interest and penalties related to unrecognized tax benefits in our income tax expense. During the years
ended December 31, 2011 and 2010, we recognized approximately $0.8 million and $2.6 million in interest and penalties,
respectively. Furthermore, we had approximately $2.6 million and $2.2 million for the payment of interest and penalties
accrued as of December 31, 2011 and 2010, respectively.
13. Commitments and Contingencies:
Lease Commitments
Minimum rental commitments for all non-cancelable operating leases, consisting principally of leases for network facilities,
real estate, office space and office equipment were as follows as of December 31, 2011:
Year
2012
2013
2014
2015
2016
Thereafter
Total
(Millions)
$ 175.6
135.0
90.1
60.0
40.1
77.0
$ 577.8
Rental expense totaled $95.6 million, $61.4 million and $29.6 million in 2011, 2010 and 2009, respectively.