Go Daddy 2015 Annual Report Download - page 113

Table of Contents
GoDaddy Inc.
Notes to Consolidated Financial Statements
(In millions, except share amounts which are reflected in thousands and per share amounts)
A reconciliation of the statutory federal income tax rate to our effective income tax rate was as follows:
Year Ended December 31,
2015
2014
2013
Expected benefit at federal statutory tax rate (35% for 2015, 34% for 2014 and 2013) $ 42.2
$ 49.7
$ 68.3
Effect of rates due to pass-through entities —
(45.8)
(66.0)
Income of non-controlling interest (15.6)
—
—
Foreign earnings taxed at lower rates (2.2)
(2.5)
(1.8)
State taxes, net of federal benefit 5.4
1.5
0.4
Effect of rates different than statutory 2.8
—
—
Other (0.7)
(0.1)
0.2
Valuation allowance (31.7)
—
—
Benefit for income taxes $ 0.2
$ 2.8
$ 1.1
Our effective tax rate differs from statutory rates primarily due to Desert Newco’s pass-through structure for U.S. income tax purposes, while being treated
as taxable in certain states and various foreign jurisdictions as well as for certain subsidiaries. In all foreign jurisdictions where we conduct business, except
Canada, we are subject to income tax in both the U.S. and the local jurisdictions.
The components of the net deferred tax assets were as follows:
December 31,
2015
2014
Deferred tax assets:
Net operating losses $ 131.9
$ 13.9
Credits and incentives 2.6
0.3
Employee compensation 0.5
0.7
Depreciation 0.3
0.1
Investment in Desert Newco 4.7
—
Other 0.7
0.9
Valuation allowance (126.9)
—
Total deferred tax assets 13.8
15.9
Deferred tax liabilities:
Identified intangible assets (8.4)
(13.5)
Total deferred tax liabilities (8.4)
(13.5)
Net deferred tax assets $ 5.4
$ 2.4
In 2015 , we adopted newly-issued guidance which simplifies the presentation of deferred income taxes by eliminating the separate classification of deferred
income tax assets and liabilities into current and noncurrent amounts. This new guidance requires all deferred tax assets and liabilities to be classified as
noncurrent. Accordingly, we retrospectively reclassified $0.9 million of current deferred tax assets to noncurrent deferred tax assets as of December 31, 2014 .
As a result of the Reorganization Transactions and the IPO, we acquired LLC Units and have recognized a deferred tax asset for the difference between the
financial reporting and tax basis of our investment in Desert Newco. In addition, we acquired certain tax attributes, including $91.8 million of NOL and credit
carryforwards, net of tax. Based on our limited operating history and future projections of taxable income, we believe there is significant uncertainty as to when we
will be able to utilize these NOL and credit carryforwards. Therefore, we have concluded these deferred tax assets will not be realized and have recorded a
valuation allowance against these deferred tax assets. Additionally, $35.1 million of our other deferred tax assets (primarily other GoDaddy Inc. NOL
carryforwards) are subject to a valuation allowance as we believe such deferred tax assets will not be realized.
107