Green Dot 2010 Annual Report Download - page 79

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Note 6 — Income Taxes
The components of income tax expense were as follows:
Year Ended
December 31, 2010
Five Months Ended
December 31, 2009 2009 2008
Year Ended July 31,
(In thousands)
Current:
Federal . . . . . . . . . . . . . . . . . $26,638 $4,389 $22,645 $ 9,611
State . . . . . . . . . . . . . . . . . . . 1,466 1,845 5,988 2,610
Current income tax expense . . . 28,104 6,234 28,633 12,221
Deferred:
Federal . . . . . . . . . . . . . . . . . (579) 3,114 (1,662) 74
State . . . . . . . . . . . . . . . . . . . (125) 416 (69) (34)
Deferred income tax expense
(benefit) . . . . . . . . . . . . . . . . (704) 3,530 (1,731) 40
Income tax expense . . . . . . . . . $27,400 $9,764 $26,902 $12,261
Income tax expense for the year ended December 31, 2010, the five months ended December 31,
2009 and the years ended July 31, 2009 and 2008 varied from the amount computed by applying the
federal statutory income tax rate to income before income taxes. A reconciliation between the expected
federal income tax expense using the federal statutory tax rate of 35% and our actual income tax expense
was as follows:
Year Ended
December 31, 2010
Five Months Ended
December 31, 2009 2009 2008
Year Ended
July 31,
U.S. federal income tax . . . . . . . . . . . . 35.0% 35.0% 35.0% 35%
State income taxes, net of federal
benefit . . . . . . . . . . . . . . . . . . . . . . . 3.8 6.7 6.1 5.7
Non-deductible offering costs . . . . . . . . 2.4 — — —
Change in state tax apportionment
method . . . . . . . . . . . . . . . . . . . . . . . (4.6) — — —
Other . . . . . . . . . . . . . . . . . . . . . . . . . . 2.7 — 0.9 0.7
Income tax expense . . . . . . . . . . . . . . . 39.3% 41.7% 42.0% 41.4%
The effective tax rates for the periods above differ from the expected federal statutory tax rate of 35%
primarily due to state income taxes, net of the federal tax benefit. For the year ended December 31, 2010,
our effective tax rate was also impacted by several discrete items. In May 2010, the California Franchise
Tax Board, or FTB, approved our petition to use an alternative apportionment method provided for in
Revenue and Tax Code Section 25137. The alternative method, known as the market-source approach,
allows us to apportion income to California based on a customer’s address, rather than apportion income
based on cost of performance, which is the standard method under existing law. Under the market-source
approach, we apportion less income to California, resulting in a lower effective state tax rate. The petition is
retroactive to our 2009 tax year, prior to the change in our fiscal year from July 31 to December 31. We
recognized the effect of the change in apportionment method, including the retroactive tax benefit, in our
consolidated financial statements for the year ended December 31, 2010. The benefit from the change in
apportionment method was partially offset by non-deductible offering costs recognized during the year
70
GREEN DOT CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)