Airtran 2009 Annual Report Download - page 100

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growth of our business. Accordingly, we do not anticipate that any cash dividends will be declared on our
common stock for the foreseeable future. Future payments of cash dividends, if any, will depend on our
financial condition, results of operations, business conditions, capital requirements, restrictions contained in
agreements, future prospects, and other factors deemed relevant by our Board of Directors.
Note 8 – Income Taxes
We are subject to income taxation in the United States and various state jurisdictions. Our tax years for 1998
through 2009 are subject to examination by the Internal Revenue Service.
The components of the provision (benefit) for income taxes are as follows (in thousands):
Year ended December 31,
2009 2008 2007
Current provision (benefit):
Federal $ (268) $ (198) $ 205
State
—
—
—
Total current provision (benefit) (268)(198) 205
Deferred provision (benefit):
Federal 890 (31,049) 30,579
State 55 (3,169) 2,619
Total deferred provision (benefit) 945 (34,218) 33,198
Income tax expense (benefit) $ 677 $ (34,416) $ 33,403
A reconciliation of taxes computed at the statutory federal tax rate on income before income taxes to the
provision (benefit) for income taxes is as follows (in thousands):
Year ended December 31,
2009 2008 2007
Tax expense (benefit) computed at federal statutory rate $ 47,369 $ (105,263) $ 29,382
State income taxes, net of federal benefit 3,113 (6,283) 1,977
Change in valuation allowance (67,437) 73,793
—
Change in unrecognized tax benefits 4,645
—
—
Other nondeductible expenses 12,987 3,337 2,044
Income tax expense (benefit) $ 677 $ (34,416) $ 33,403
Income tax benefits recorded on losses result in deferred tax assets for financial reporting purposes. We are
required to provide a valuation allowance for deferred tax assets to the extent management determines that it is
more likely than not that such deferred tax assets will ultimately not be realized. We expect to realize a portion
of our deferred tax assets (including the deferred tax asset associated with loss carry-forwards) through the
reversal of existing temporary differences. However, we have determined that it is more likely than not that our
deferred tax assets in excess of our deferred tax liabilities will not ultimately be realized, in part due to our
cumulative losses measured over the past three years. Therefore, we are required to provide a valuation
allowance for our deferred tax assets in excess of our deferred tax liabilities. As a result, beginning with the
third quarter of 2008, our losses were not reduced by any tax benefit. We reported income before income taxes
during the year ended December 31, 2009; however, we did not recognize material tax expense in 2009 due to
reductions in the valuation allowance which largely offset income tax expense for 2009. During 2009, we