Windstream 2012 Annual Report Download - page 171

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
____
F-73
12. Income Taxes, Continued:
We adopted authoritative guidance for accounting for uncertainty in income taxes on January 1, 2007. A reconciliation of the
unrecognized tax benefits is as follows:
(Millions) 2012 2011 2010
Beginning balance $ 18.8 $ 18.6 $ 4.3
Additions based on PAETEC acquisition — 0.5 —
Additions based on Q-Comm acquisition — 0.6 —
Additions based on D&E acquisition — — 0.4
Additions based on Lexcom acquisition — — 0.2
Additions based on NuVox acquisition — — 1.8
Additions based on tax positions of prior years — — 15.7
Reductions for tax positions of prior years (0.5)—
(0.6)
Reduction as a result of a lapse of the applicable statute of
limitations —(0.9)(3.2)
Ending balance $ 18.3 $ 18.8 $ 18.6
We anticipate that $15.7 million in unrecognized tax benefits will be recognized in the next twelve months due to the expiration
of the statute of limitations. We do not expect this change in unrecognized tax benefits to have a significant impact on our
results from operations or financial position. The total amount of unrecognized tax benefits, if recognized, that would affect the
effective tax rate is $16.1 million, $16.5 million and $16.6 million (net of indirect benefits) for the years ended December 31,
2012, 2011 and 2010, respectively.
Included in the balance at December 31, 2012, 2011 and 2010, are $0.8 million, $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, 2012, 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 2009. 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 as a component of income tax expense. During
the years ended December 31, 2012, 2011 and 2010, we recognized approximately $0.6 million, $0.8 million and $2.6 million
in interest and penalties, respectively. Furthermore, we had approximately $3.1 million, $2.6 million and $2.2 million of
interest and penalties accrued as of December 31, 2012, 2011 and 2010, respectively.