Thursday, May 1, 2008

MFRI, INC. FORM 10-K ....... Tax Risk FIN 48 Exposure

What follows is an extract from the 10-K form posted to the SEC for MFRI Inc, showing a tax exposure of over $ 700 000 to the IRS. It is estimated that the tax gap in the USA is close to $ 350bn, much of which the IRS could collect if they had sufficient staff and budget to do so. In an efficient system an IRS agent would be looking out for this type of exposure, conducting a field audit and looking to collect what is apparently due to them by the own admission of the company under FIN 48.


In the first quarter of 2007, the Company adopted FIN 48. The total amount of unrecognized tax liability as of February 1, 2007 was approximately $573,700, all of which would impact the effective tax rate if recognized. A decrease of $504,500 was recorded to retained earnings as of February 1, 2007 upon the adoption of FIN 48 (“Accounting for Uncertainty in Income Taxes”). During 2007, the liability for income taxes associated with uncertain tax positions as described in FIN 48 increased by $130,400 for a total of $704,100 at January 31, 2008. These non-current income tax liabilities are recorded in other long-term liabilities in the consolidated balance sheet. Included in the total unrecognized tax liability were estimated accrued interest of $33,700 and penalties of $44,100. The Company’s policy is to include interest and penalties in income tax expense."

For the full report:

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