DIRECTV 2003 Annual Report Download - page 95

THE DIRECTV GROUP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS — (continued)
Included in “Prepaid expenses and other” in the Consolidated Balance Sheets are $59.5 million and $97.7
million of current deferred tax assets at December 31, 2003 and 2002, respectively.
No income tax provision has been made for the portion of undistributed earnings of foreign subsidiaries
deemed permanently reinvested that amounted to approximately $94.4 million and $76.9 million at December
31, 2003 and 2002, respectively. It is not practicable to determine the amount of the unrecognized deferred tax
liability related to the investments in foreign subsidiaries.
At December 31, 2003, the Company had $1.3 billion of federal net operating losses which expire in 2023,
foreign net operating losses of $459.7 million with varying expiration dates, federal research tax credits of $61.8
million which expire between 2018 and 2023, and alternative minimum tax credits of $60.8 million which can be
carried forward indefinitely. The valuation allowance balances at December 31, 2003 and 2002 of $171.5 million
and $133.1 million, respectively, are primarily attributable to the unused foreign operating losses which are
available to carry forward. For the period ended December 31, 2003, the change in the valuation allowance was
primarily attributable to a $69.7 million increase for the tax effect of current year foreign losses for which no tax
benefit has been recognized and a $30 million decrease related to the tax benefit of expired foreign losses.
The Company and GM have amended their income tax allocation agreement which governs the allocation of
certain U.S. income tax liabilities and sets forth agreements with respect to certain other tax matters. Under the
amended terms, for tax periods prior to the Company’s split-off from GM, the Company will be treated as the
common parent of a separate affiliated group of corporations filing a consolidated return. The Company will be
compensated by GM for any tax benefits, such as net operating loss and tax credit carryforwards, that have not
been used to offset the Company’s separate income tax liability through the date of the Company’s split-off from
GM, but have been used by the GM consolidated group. Such compensation will not exceed $75.4 million, and in
the case of net operating losses and similar tax attributes, the tax benefit will be based on a 24% rate.
At the time of the Company’s split-off from GM, the amount of the Company’s tax receivable from GM, as
determined on a separate return basis, exceeded the receivable determined pursuant to the amended income tax
allocation agreement by $25.1 million. Such amount was reported by the Company as a distribution to GM.
The Company also has an agreement with The Boeing Company (“Boeing”), which governs the Company’s
rights and obligations with respect to U.S. federal and state income taxes for all periods prior to the sale of the
Company’s satellite systems manufacturing businesses in 2000. The Company is responsible for any income
taxes pertaining to those periods prior to the sale, including any additional income taxes resulting from U.S.
federal and state tax audits, and is entitled to any U.S. federal and state income tax refunds relating to those
years.
The Company has an agreement with Raytheon Company (“Raytheon”) which governs the Company’s
rights and obligations with respect to U.S. federal and state income taxes for all periods prior to the spin-off and
merger of the Company’s defense electronics business with Raytheon in 1997. The Company is responsible for
any income taxes pertaining to those periods prior to the merger, including any additional income taxes resulting
from U.S. federal and state tax audits, and is entitled to any U.S. federal and state income tax refunds relating to
those years.
The U.S. federal income tax returns of the Company have been examined and the Company has concluded
its administrative appeals process with the Internal Revenue Service (“IRS”) for all tax years through 1997. The
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