Comfort Inn 2005 Annual Report Download - page 49

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CHOICE HOTELS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Deferred tax assets (liabilities) were comprised of the following:
December 31,
2005 2004
(In thousands)
Depreciation and amortization ................................ $(13,999) $(12,543)
Prepaidexpenses........................................... (2,882) (7,327)
Foreign Operations ......................................... —(57)
Other .................................................... (3,185) (2,871)
Gross deferred tax liabilities .................................. (20,066) (22,798)
Foreign operations ......................................... 358 —
Accrued expenses .......................................... 12,347 9,277
Accrued compensation ...................................... 11,497 7,338
Other .................................................... 1,769 1,461
Gross deferred tax assets .................................... 25,971 18,076
Net deferred tax asset (liability) ............................... $ 5,905 $ (4,722)
Included in the accompanying consolidated balance sheet as follows:
December 31,
2005 2004
(In thousands)
Current net deferred tax assets ................................ $2,616 $ 2,252
Non-current net deferred tax assets (liabilities) ................... 3,289 (6,974)
Net deferred tax asset (liability) ............................... $5,905 $(4,722)
No provision has been made for U.S. federal income taxes on approximately $9 million of accumulated and
undistributed earnings of foreign subsidiaries at December 31, 2005 since these earnings are considered to be
permanently invested in foreign operations.
On October 22, 2004, the American Jobs Creation Act of 2004 (“AJCA”) was signed into law. The AJCA
included a temporary one-time incentive for United States multinational corporations to repatriate undistributed
earnings of foreign subsidiaries by providing an 85 percent dividends received deduction for qualifying dividends
from controlled foreign corporations, as defined in the AJCA, at an effective tax cost of 5.25 percent on any such
repatriated foreign earnings. The Company elected to apply this provision to qualifying earnings repatriations in
2005. During the fourth quarter of 2005, the Company repatriated earnings totaling approximately $23.5 million,
resulting in the recordation of additional income tax totaling approximately $1.2 million.
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