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Income Taxes
9 Months Ended
Sep. 30, 2016
Income Tax Disclosure [Abstract]  
Income Taxes

Note 6 — Income Taxes

 

Refer to Notes 1 and 15 of the Company’s audited financial statements for the year ended December 31, 2015, which are included as Exhibit 13.1 to the Company’s Annual Report on Form 10-K for the year ended December 31, 2015, as filed with the SEC, for a discussion regarding income taxes.

 

TSYS is the parent of an affiliated group that files a consolidated U.S. federal income tax return and most state and foreign income tax returns on a separate entity basis. In the normal course of business, the Company is subject to examinations by these taxing authorities unless statutory examination periods lapse. TSYS is no longer subject to U.S. federal income tax examinations for years before 2011 and with few exceptions, the Company is no longer subject to income tax examinations from state and local or foreign tax authorities for years before 2005. There are currently federal income tax examinations in progress for the years 2009 through 2012 for a subsidiary which TSYS acquired in 2013.  Also, TSYS is currently undergoing federal income tax examinations for the years 2011 through 2013.  Additionally, a number of tax examinations are in progress by the relevant state tax authorities. Although TSYS is unable to determine the ultimate outcome of these examinations, TSYS believes that its liability for uncertain tax positions relating to these jurisdictions for such years is adequate.

 

TSYS’ effective tax rate was 35.3% and 24.5% for the three months ended September 30, 2016 and 2015, respectively.  TSYS’ effective tax rate was 35.5% and 30.7% for the nine months ended September 30, 2016 and 2015, respectively. The increased rate during the nine months ended September 30, 2016 was primarily due to realizing favorable discrete items during 2015 and increases in permanent items during 2016.

 

GAAP prescribes a recognition threshold and measurement attribute for the financial statement recognition, measurement and disclosure of a tax position taken or expected to be taken in a tax return. The amount of unrecognized tax benefits were $17.5 million and $13.1 million as of September 30, 2016 and December 31, 2015, respectively, which resulted in an increase of $4.4 million during the period.

 

TSYS recognizes potential interest and penalties related to the underpayment of income taxes as income tax expense in the consolidated statements of income. Gross accrued interest and penalties on unrecognized tax benefits totaled $1.2 million and $0.7 million as of September 30, 2016 and December 31, 2015, respectively. The total amounts of unrecognized income tax benefits as of September 30, 2016 and December 31, 2015, that, if recognized, would affect the effective tax rates are $18.1 million and $13.2 million (net of the federal benefit on state tax issues), respectively, which include interest and penalties of $0.8 million and $0.5 million, respectively. TSYS does not expect any significant changes to its calculation of uncertain tax positions during the next twelve months.