Google 2010 Annual Report Download - page 92

As of December 31, 2010, our federal and state net operating loss carryforwards for income tax purposes
were approximately $362 million and $252 million. If not utilized, the federal net operating loss carryforwards will
begin to expire in 2018 and the state net operating loss carryforwards will begin to expire in 2015. The net
operating loss carryforwards are subject to various annual limitations under Section 382 of the Internal Revenue
Code.
In 2008, we recorded an impairment charge of $1.1 billion related primarily to our investments in AOL and
Clearwire. For income tax purposes, the impairment would generate an equal amount of capital loss when
recognized, a portion of which was recognized in 2009. As of December 31, 2010, our federal and state capital loss
carryforwards for income tax purposes were approximately $682 million and $936 million. If not utilized, the
recognized federal and state capital losses of $327 million and $581 million will begin to expire in 2014. We believe
it is more likely than not that a portion of the capital loss carryforwards will not be realized. Therefore, we have
recorded a valuation allowance on both our federal and state capital loss carryforwards in the amount of $292
million. We will reassess the valuation allowance quarterly and if future evidence allows for a partial or full release
of the valuation allowance, a tax benefit will be recorded accordingly.
Uncertain Tax Positions
The following table summarizes the activity related to our gross unrecognized tax benefits from January 1,
2008 to December 31, 2010 (in millions):
BalanceasofJanuary1,2008................................................................... $ 387
Increasesrelatedtoprioryeartaxpositions ....................................................... 112
Decreases related to prior year tax positions ....................................................... (15)
Increasesrelatedtocurrentyeartaxpositions ..................................................... 237
BalanceasofDecember31,2008 ............................................................... 721
Increasesrelatedtoprioryeartaxpositions ....................................................... 222
Decreasesrelatedtoprioryeartaxpositions....................................................... (1)
Increasesrelatedtocurrentyeartaxpositions ..................................................... 246
Balance as of December 31, 2009 ............................................................... 1,188
Increasesrelatedtoprioryeartaxpositions ....................................................... 37
Decreases related to prior year tax positions ....................................................... (197)
Decreases relating to settlement with tax authorities ............................................... (47)
Decreases as a result of a lapse of applicable statute of limitation .................................... (97)
Increasesrelatedtocurrentyeartaxpositions ..................................................... 256
Balance as of December 31, 2010 ................................................................ $1,140
Our total unrecognized tax benefits that, if recognized, would affect our effective tax rate were $561 million,
$814 million, and $951 million as of December 31, 2008, 2009 and 2010.
As of December 31, 2009 and 2010, we had accrued $100 million and $97 million for payment of interest and
penalties. Interest and penalties included in our provision for income taxes were not material in all the periods
presented.
We and our subsidiaries are routinely examined by various taxing authorities. Although we file U.S. federal,
U.S. state, and foreign tax returns, our two major tax jurisdictions are the U.S. and Ireland. During the three months
ended December 31, 2007, the IRS completed its examination of our 2003 and 2004 tax years. We have filed an
appeal with the IRS for certain issues related to this audit and no resolution of the issues has been achieved at this
time but we believe we have adequately provided for these items and any adverse results would have an
immaterial impact on our unrecognized tax benefit balance within the next 12 months. The IRS has completed its
examination of our 2005 and 2006 tax years. As a result, we settled and released certain tax reserves in the three
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