Citrix 2009 Annual Report Download - page 115

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CITRIX SYSTEMS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
A reconciliation of the Company’s effective tax rate to the statutory federal rate is as follows:
Year Ended
December 31,
2009 2008 2007
Federal statutory taxes ...................................................... 35.0% 35.0% 35.0%
State income taxes, net of federal tax benefit .................................... 3.6 4.3 4.1
Foreign operations ......................................................... (24.1) (30.1) (21.4)
Permanent differences ...................................................... 2.8 (0.2) 3.0
Tax credits ............................................................... (23.9) (5.3) (3.2)
Stock option compensation .................................................. 1.2 4.9 1.4
Change in accruals for uncertain tax positions ................................... 8.8 1.0 (3.8)
Other .................................................................... (1.9) (0.1) (0.1)
Change in valuation allowance ............................................... — — (0.5)
1.5% 9.5% 14.5%
The Company and one or more of its subsidiaries is subject to U.S. federal income taxes, as well as income
taxes of multiple state and foreign jurisdictions. With few exceptions, the Company is no longer subject to U.S.
federal, state and local, or non-U.S. income tax examinations by tax authorities for years prior to 2004.
During the third quarter of 2009, the IRS concluded its examination of the Company’s income tax returns
for 2004 and 2005 and issued the RAR. The Company agreed with all of the adjustments contained in the RAR,
with the exception of the transfer pricing and consequential adjustments relating to the intercompany transfer of
certain intellectual property in earlier tax years. The RAR asserts income tax deficiencies related to the transfer
pricing and consequential adjustments of approximately $81.3 million for tax years 2004 and 2005, excluding
interest. In addition, the transfer pricing and consequential adjustments to the Company’s 2004 and 2005 tax
years would impact its income tax liabilities in tax years subsequent to 2005. The Company disagrees with the
adjustments and has filed a protest, which caused the matter to be referred to the Appeals Division of the IRS.
The Company is contesting the adjustments through the IRS appeals process and the courts, if necessary. There
can be no assurance, however, that this matter, or any future tax examinations involving similar assertions, will
be resolved in the Company’s favor, and an adverse outcome of this matter could have a material adverse effect
on the Company’s results of operations and financial condition. Regardless of whether this matter is resolved in
the Company’s favor, this matter could be expensive and time-consuming to defend.
During the fourth quarter of 2009, the IRS commenced its examination of the Company’s U.S. federal
income tax returns for the 2006 through 2008 tax years.
F-35