The Western Union Company (NYSE: WU) announced today that it has reached an agreement with the U.S. Internal Revenue Service (IRS) resolving all remaining issues related to the restructuring of its international operations in 2003.
The agreement covers the Company's tax treatment for imputed intangibles income, trademark buy-in royalties, and other items.
As a result of the agreement, the Company will make cash payments to the IRS and various state tax authorities of approximately $220 million, which are in addition to a $250 million tax deposit made with the IRS in 2010 connected to the potential liability. The Company also will eliminate its related tax contingency reserve and expects to record a one-time tax benefit of approximately $200 million in 2011. These actions reflect the impact of the resolution reached in the agreement with the IRS for the 2003-2004 tax years as well as the application of the agreed treatment to the subsequent years through 2011.
Based on the resolution of the tax treatment of imputed intangibles income, trademark buy-in royalties, and other items, the Company anticipates 2012 and future year effective tax rates to be reduced by approximately seven percentage points (-7%), compared to the Company's previous effective tax rate outlook for 2011 of 23% to 24%. Future year tax rates may vary due to tax law changes and other factors.