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10-K
ICONIX BRAND GROUP, INC. filed this Form 10-K on 03/28/2019
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With the exception of the Buffalo brand joint venture, Diamond Icon Joint Venture and Iconix Middle East joint venture, the Company is not responsible for the income taxes related to the non-controlling interest’s share of the joint venture’s earnings. Therefore, the tax liability associated with the non-controlling interest share of the joint venture’s earnings is not reported in the Company’s income tax expense, despite the joint venture’s entire income being consolidated in the Company’s reported income before income tax expense. As such, the joint venture’s earnings have the effect of lowering our effective tax rate. This effect is more pronounced in periods in which joint venture earnings are higher relative to our other earnings. Since the Buffalo brand joint venture is a taxable entity in Canada, and the Diamond Icon joint venture and Iconix Middle East joint venture are taxable entities in the United Kingdom, the Company is required to report its tax liability, including taxes attributable to the non-controlling interest, in its statement of operations. All other consolidated joint ventures are partnerships and treated as pass-through entities not subject to taxation in their local tax jurisdiction, and therefore the Company includes only the tax attributable to its proportionate share of income from the joint venture in income tax expense.

The Company files income tax returns in the U.S. federal and various state and local jurisdictions. For federal income tax purposes, during the fourth quarter of 2016, the Internal Revenue Service initiated an audit of the 2014 federal tax return which is ongoing.  The State of California is currently auditing tax years 2013 through 2014.  During 2018, the Company concluded its New York State audit covering 2011 through 2014.  There was no tax charge related to this examination during the year as the $0.5 million due was recorded in prior years.  During 2017, the Company concluded its New York City audit covering 2007 through 2014.  This resulted in a tax charge of approximately $2.0 million recorded during the year.  The Company also files returns in numerous foreign jurisdictions that have varied years remaining open for examination, but generally the statute of limitations is three to four years from when the return is filed.

 

At December 31, 2018 and December 31, 2017, the total unrecognized tax benefit was approximately $0 million and $0.4 million, respectively. A reconciliation of the beginning and ending amount of gross unrecognized tax benefits, excluding interest and penalties, is as follows:

 

 

 

2018

 

 

2017

 

Uncertain tax positions at January 1

 

$

354

 

 

$

7,470

 

Additions for current year tax positions

 

 

 

 

 

 

Additions for prior year tax positions

 

 

 

 

 

 

Reductions for prior year tax positions

 

 

(15

)

 

 

(397

)

Settlements

 

 

(339

)

 

 

(6,719

)

Uncertain tax positions at December 31

 

$

 

 

$

354

 

 

Approximately $0 million of unrecognized tax benefits at December 31, 2018 would affect the Company's effective tax rate if recognized. The Company believes it is reasonably possible that there will be no reduction of unrecognized tax benefits in the next 12 months as a result of settlements with taxing authorities and or statute of limitations expirations.

 

The Company is continuing its practice of recognizing interest and penalties to income tax matters in income tax expense. Total interest related to uncertain tax positions for FY 2018 and FY 2017 were $ 0 million and $0.9 million, respectively. There were no penalties accrued in any of these periods. 

 

118


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