FORM 10-K - Harman

Harman International Industries, Incorporated and Subsidiaries
(Dollars in thousands, except per-share data and unless otherwise indicated)
in 2023. The alternative minimum tax credit does not expire. The foreign tax credit will begin to expire in 2016.
A $117.8 million valuation allowance has been recorded for U. S. Federal foreign tax credits. Additionally, we
have a German net operating loss carryforward valued at $23.8 million that will not expire and other foreign tax
loss carryforwards and credits before valuation allowance of $20.3 million that do not expire. A valuation
allowance of $13.8 million has been established for certain of the foreign net operating loss carryforwards.
Management believes the results of future operations will generate sufficient taxable income to realize the net
deferred tax asset.
We have not provided U.S. Federal or foreign withholding taxes on foreign subsidiary undistributed
earnings as of June 30, 2009, because these foreign earnings are intended to be permanently reinvested. Such
earnings would be subject to U.S. taxation if repatriated to the U.S. Determination of the amount of unrecognized
deferred tax liability associated with the permanently reinvested cumulative undistributed earnings is not
practicable.
Effective July 1, 2007, we adopted FIN 48, “Accounting for Uncertainty in Income Taxes—an interpretation
of FASB Statement No. 109” (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes by
prescribing rules for recognition, measurement and classification in our consolidated financial statements of tax
positions taken or expected to be taken in a tax return. For tax benefits to be recognized under FIN 48, a tax
position must be more-likely-than-not to be sustained upon examination by taxing authorities. The amount
recognized is measured as the largest amount of benefit that is greater than 50% likely of being realized upon
settlement. The cumulative effect of applying the recognition and measurement provisions upon adoption of
FIN 48 resulted in a decrease of $7.2 million of unrealized tax benefits to our balance of $31.2 million. This
reduction was included as an increase to the July 1, 2007 balance of retained earnings.
Changes in the total amount of gross unrecognized tax benefits are as follows:
Balance at July 1, 2008 .............................................. $ 9,529
Increases based on tax positions related to the current year .................. 5,599
Decreases due to settlements with taxing authorities ........................ —
Decreases due to tax positions of prior years .............................. (832)
Change due to foreign currency translation ............................... (295)
Balance at June 30, 2009 ............................................. $14,001
The unrecognized tax benefits at June 30, 2009 are permanent in nature and, if recognized, would reduce
our effective tax rate. However, our federal, certain state and certain non-U.S. income tax returns are currently
under various stages of audit or potential audit by applicable tax authorities and the amounts ultimately paid, if
any, upon resolution of the issues raised by the taxing authorities may differ materially from the amounts accrued
for each year. Our material tax jurisdictions are Germany and the United States.
The tax years subject to examination in Germany are fiscal years 2005 through the current year. The tax
years subject to examination in the United States are fiscal years 2006 through the current year. Due to
provisions allowed in the tax law, we may recognize $10.5 million in unrecognized tax benefits within the next
12 months.
We recognize interest and penalties related to unrecognized tax benefits in income tax expense. As of
June 30, 2009, the amount accrued for interest and penalties was $2.0 million.
Cash paid for Federal, state and foreign income taxes were $4.1 million, $129.1 million, and $144.7 million,
during fiscal years ended June 30, 2009, 2008 and 2007, respectively.
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