Alaska Airlines and Horizon Air 2009 Annual Report Download - page 183

NOTE 11. INCOME TAXES
Deferred Income Taxes
Deferred income taxes reflect the impact of
temporary differences between the carrying
amounts of assets and liabilities for financial
reporting purposes and such amounts for tax
purposes.
Deferred tax (assets) and liabilities comprise the
following at December 31 (in millions):
2009 2008
Excess of tax over book
depreciation .................. $ 603.9 $ 526.9
Fuel hedge contracts ............. 10.8 —
Other—net ..................... 11.3 5.3
Gross deferred tax liabilities ....... 626.0 532.2
Mileage Plan ................... (252.6) (255.3)
Fuel hedge contracts ............. —(23.2)
AMT and other tax credits ......... (56.8) (62.3)
Leased aircraft return provision ..... (1.8) (5.2)
Inventory obsolescence ........... (16.9) (13.8)
Deferred gains .................. (17.8) (18.5)
Employee benefits ............... (197.7) (250.4)
Loss carryforwards* ............. (30.2) (3.3)
Other—net ..................... (21.4) (27.9)
Gross deferred tax assets ......... (595.2) (659.9)
Net deferred tax (assets) liabilities . . $ 30.8 $(127.7)
Current deferred tax asset ......... $(120.3) $(164.4)
Noncurrent deferred tax liability ..... 151.1 36.7
Net deferred tax (asset) liability ..... $ 30.8 $(127.7)
* Federal loss carryforwards of $73.0 million ($25.6
million tax effected) expire beginning in 2029. State loss
carryforwards of $97.5 million ($4.6 million tax effected)
expire beginning in 2010 and ending in 2029.
In 2009, a new federal law liberalized rules for
certain net operating losses (NOLs), increasing
the carryback period for 2008 or 2009 NOLs from
two years to up to five years at the taxpayer’s
election. In addition, the new law suspended the
90-percent limitation on the utilization of NOLs for
Alternative Minimum Tax (AMT) NOLs attributed to
the extended carryback election. Because of
these law changes, the Company recorded $5.0
million in federal and state income tax receivables
and a corresponding decrease in federal and
state AMT credit carryforwards.
The Company has concluded that it is more likely
than not that its deferred tax assets will be
realizable and thus no valuation allowance has
been recorded as of December 31, 2009. This
conclusion is based on the expected future
reversals of existing taxable temporary
differences, anticipated future taxable income,
and the potential for future tax planning
strategies to generate taxable income, if needed.
The Company will continue to reassess the need
for a valuation allowance during each future
reporting period.
Components of Income Tax Expense (Benefit)
The components of income tax expense (benefit)
were as follows (in millions):
2009 2008 2007
Current tax expense (benefit):
Federal ................ $ (3.4) $(13.4) $12.8
State ................. (1.3) — 4.8
Total current ............... (4.7) (13.4) 17.6
Deferred tax expense (benefit):
Federal ................ 76.7 (56.1) 55.1
State ................. 9.3 (7.8) 3.5
Total deferred .............. 86.0 (63.9) 58.6
Total tax expense (benefit)
related to income (loss) ..... $81.3 $(77.3) $76.2
Income Tax Rate Reconciliation
Income tax expense (benefit) reconciles to the
amount computed by applying the U.S. federal
rate of 35% to income (loss) before income tax
and accounting change as follows (in millions):
2009 2008 2007
Income (loss) before
income tax .......... $202.9 $(213.2) $200.5
Expected tax expense
(benefit) ............ 71.0 (74.6) 70.2
Nondeductible
expenses ........... 3.1 3.4 3.4
State income taxes ..... 5.5 (5.1) 4.9
Other—net* ........... 1.7 (1.0) (2.3)
Actual tax expense
(benefit) ............ $ 81.3 $ (77.3) $ 76.2
Effective tax rate ....... 40.1% 36.3% 38.0%
* In 2007, other-net includes $1.0 million of tax benefits
due to a favorable decision in a matter with the State of
California and $1.0 million of tax benefits related to the
recognition of California income tax credit carryforwards.
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ŠForm 10-K