PARSIPPANY, NJ – Wyndham Worldwide Corporation and its former parent company, Cendant Corporation (Cendant) has reached an agreement with the United States Internal Revenue Service (IRS) to resolve and pay certain contingent and deferred tax liabilities relating to the audit of the federal income tax returns for Cendant’s taxable years 2003 through 2006, during which time Wyndham Worldwide was included in Cendant’s tax returns.
As of June 30, 2010, the company’s accrual for outstanding Cendant contingent tax liabilities was US$274 million, of which US$185 million (net of state, foreign, and other deferred tax adjustments) was related to the IRS audit. The company expects to pay approximately US$145 million during the third quarter 2010, including estimated interest on taxes due, in connection with the settlement. As a result of this agreement, in the third quarter 2010, Wyndham Worldwide will realize an approximate US$40 million benefit to its net income, reflecting reversals of previously recorded legacy contingent tax liability accruals.
“We are pleased to have resolved this matter, which successfully concludes the IRS audit issues we inherited upon our spin-off from Cendant four years ago. With this investor uncertainty behind us, we will continue our focus on growing free cash flow and earnings,” said Tom Conforti, executive vice president and chief financial officer of Wyndham Worldwide.
Wyndham Worldwide will exclude the net income benefit from adjusted results, to which the company refers when providing guidance and outlook to investors.