Internal Revenue Service Requests Adjustment to ISC's Fiscal 1999 and 2000 Tax Depreciation Expense
June 02 2005 - 5:30PM
PR Newswire (US)
Internal Revenue Service Requests Adjustment to ISC's Fiscal 1999
and 2000 Tax Depreciation Expense - Company Expects to Appeal
Decision - DAYTONA BEACH, Fla., June 2 /PRNewswire-FirstCall/ --
International Speedway Corporation (NASDAQ:ISCA) (OTC:ISCB)
(BULLETIN BOARD: ISCB) ("ISC") today announced it has received a
report from the Internal Revenue Service (the "IRS") requesting
downward adjustments of approximately $33 and $37 million to ISC's
tax depreciation expense for the fiscal years ended November 30,
1999 and 2000, respectively. Additional adjustments to the
Company's tax depreciation expense are expected to be requested
later by the IRS for fiscal years ended November 30, 2001 through
2004. Based on the federal income tax statutory rate of 35%, the
combined requested reduction of tax depreciation expense for the
fiscal years ended November 30, 1999 and 2000, would result in the
reclassification of approximately $25 million of tax expense from
deferred to current. Including related interest, the combined
after-tax cash flow impact of the requested adjustments will be
approximately $33 million. The Company disagrees with the IRS'
position and expects to proceed to the administrative appeals
process within the IRS. Overview Since 1986, ISC has depreciated
its motorsports entertainment facility assets under Asset Class
80.0 of Section 168 of the Internal Revenue Code, a depreciation
rule applicable to theme and amusement parks and other similar
combinations of entertainment attractions. Under this
classification, assets are considered seven-year property for tax
purposes (i.e., depreciated over a seven-year period) and the
Company has relied on this interpretation. As previously disclosed
in the Company's periodic regulatory filings with the Securities
and Exchange Commission, the IRS is performing a periodic
examination of ISC's federal income tax returns for the years ended
November 30, 1999 through 2003, and is challenging the tax
depreciation treatment for a significant portion of its motorsports
entertainment facility assets. ISC believes that its application of
the federal income tax regulations in question, which have been
applied consistently since being adopted in 1986 and have been
subjected to previous IRS audits, is appropriate, and intends to
vigorously defend the merits of its position. The administrative
appeals process within the IRS is expected to take six to 18 months
to complete. If the Company's appeal is not resolved
satisfactorily, ISC will evaluate all of its options, including
litigation. It is important to note the federal American Jobs
Creation Act of 2004 legislation, which was effective on October
23, 2004, provides owners of motorsports entertainment facility
assets a seven-year recovery period for tax depreciation purposes.
The motorsports provision applies prospectively from the date of
enactment through January 1, 2008. Driven by its long-term capital
investment strategy, ISC and others in the industry are pursuing a
permanent seven-year prospective tax depreciation provision.
Financial Impact In order to prevent incurring additional interest,
the Company expects to deposit the requested $33 million for the
fiscal years ended November 30, 1999 and 2000, with the IRS. Also,
as previously discussed, additional adjustments to the Company's
tax depreciation expense are expected to be requested later by the
IRS for fiscal years ended November 30, 2001 through 2004.
Including related interest, ISC estimates the combined after-tax
cash flow impact of these additional federal tax adjustments, and
related state tax revisions for all periods, to range between $90
and $110 million. While an adverse resolution of these matters
could result in the aforementioned impact on cash flow, ISC
believes that it has provided adequate reserves in its consolidated
financial statements. As a result, the Company does not expect that
such an outcome would have a material adverse impact on ISC's
results of operations. International Speedway Corporation is a
leading promoter of motorsports activities in the United States,
currently promoting more than 100 racing events annually as well as
numerous other motorsports-related activities. The Company owns
and/or operates 11 of the nation's major motorsports entertainment
facilities, including Daytona International Speedway in Florida
(home of the Daytona 500); Talladega Superspeedway in Alabama;
Michigan International Speedway located outside Detroit; Richmond
International Raceway in Virginia; California Speedway near Los
Angeles; Kansas Speedway in Kansas City, Kansas; Phoenix
International Raceway in Arizona; Homestead-Miami Speedway in
Florida; Martinsville Speedway in Virginia; Darlington Raceway in
South Carolina; and Watkins Glen International in New York. Other
motorsports entertainment facility ownership includes an indirect
37.5% interest in Raceway Associates, LLC, which owns and operates
Chicagoland Speedway and Route 66 Raceway near Chicago, Illinois.
The Company also owns and operates MRN Radio, the nation's largest
independent sports radio network; DAYTONA USA, the "Ultimate
Motorsports Attraction" in Daytona Beach, Florida, the official
attraction of NASCAR; and subsidiaries which provide catering
services, food and beverage concessions, and produce and market
motorsports-related merchandise under the trade name "Americrown."
For more information, visit the Company's Web site at
http://www.iscmotorsports.com/ . Statements made in this release
that express the Company's or management's beliefs or expectations
and which are not historical facts or which are applied
prospectively are forward-looking statements. It is important to
note that the Company's actual results could differ materially from
those contained in or implied by such forward-looking statements.
The Company's results could be impacted by risk factors, including,
but not limited to, weather surrounding racing events, government
regulations, economic conditions, consumer and corporate spending,
military actions, air travel and national or local catastrophic
events. Additional information concerning factors that could cause
actual results to differ materially from those in the forward-
looking statements is contained from time to time in the Company's
SEC filings including, but not limited to, the 10-K and subsequent
10-Qs. Copies of those filings are available from the Company and
the SEC. The Company undertakes no obligation to release publicly
any revisions to these forward-looking statements that may be
needed to reflect events or circumstances after the date hereof or
to reflect the occurrence of unanticipated events. The inclusion of
any statement in this release does not constitute an admission by
International Speedway or any other person that the events or
circumstances described in such statement are material. DATASOURCE:
International Speedway Corporation CONTACT: Wes Harris, Senior
Director, Investor Relations, International Speedway Corporation,
+1-386-947-6465 Web site: http://www.iscmotorsports.com/
Copyright