DIRECTV 2006 Annual Report Download - page 101

THE DIRECTV GROUP, INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS —(continued)
in the future, offset by a $9.6 million decrease for the tax effect of current year capital gains adjusted
for the tax effect of future capital gains and losses for which we have not recognized a tax benefit.
Although realization is not assured, we have concluded that it is more likely than not that our
unreserved deferred tax assets will be realized in the ordinary course of operations based on available
positive and negative evidence, including scheduling of deferred tax liabilities and projected income
from operating activities. The underlying assumptions we use in forecasting future taxable income
require significant judgment and take into account our recent performance.
As of December 31, 2006, we have approximately $31.2 million of federal net operating losses that
expire in 2023, foreign net operating losses of $376.4 million with varying expiration dates, federal
research tax credits of $78.8 million that expire between 2017 and 2024, and alternative minimum tax
credits of $62.9 million that can be carried forward indefinitely.
No income tax provision has been made for the portion of undistributed earnings of foreign
subsidiaries deemed permanently reinvested that amounted to approximately $21.4 million in 2004. It is
not practicable to determine the amount of the unrecognized deferred tax liability related to the
investments in foreign subsidiaries.
As part of our split-off from GM in 2003, we and GM amended the income tax allocation
agreement between us that governs the allocation of certain U.S. income tax liabilities and certain
other tax matters. Under the amended terms, for tax periods prior to our split-off from GM, we are
treated as the common parent of a separate affiliated group of corporations filing a consolidated
return. GM will compensate us for any tax benefits, such as net operating loss and tax credit
carryforwards that have not been used to offset our separate income tax liability through the date of
our 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 amount of
compensation payable to GM is based on a 24% rate.
Our U.S. federal income tax returns have been examined and all disputes between us and the
Internal Revenue Service have been fully resolved for all tax years through 2000. The IRS is currently
examining our U.S. federal tax returns for years 2001 through 2003. We are also being examined by or
expect to be examined by certain state and foreign taxing jurisdictions for periods still open to
examination. Management believes that adequate provision has been made for any adjustment that
might be assessed for open years.
Note 11: Pension and Other Postretirement Benefit Plans
Most of our employees are eligible to participate in our funded non-contributory defined benefit
pension plan, which provides defined benefits based on either years of service and final average salary,
or eligible compensation while employed by the company. Additionally, we maintain a funded
contributory defined benefit plan for employees who elected to participate prior to 1991, and an
unfunded, nonqualified pension plan for certain eligible employees. For participants in the contributory
pension plan, we also maintain a postretirement benefit plan for those eligible retirees to participate in
health care and life insurance benefits generally until they reach age 65. Participants may become
eligible for these health care and life insurance benefits if they retire from our company between the
ages of 55 and 65. The health care plan is contributory with participants’ contributions subject to
adjustment annually; the life insurance plan is non-contributory.
We use a November 30 measurement date for our pension and postretirement benefit plans.
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