Harman Kardon 2008 Annual Report Download - page 76

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58
Income tax expense consists of the following:
Years ended June 30
,
($
000s omitted
)
2008 2007 2006
Current:
Federal
$
2
,
194 3
,
991
(
3
,
692
)
State 400 400 325
Forei
g
n 22
,
551 107
,
818 134
,
610
25
,
145 112
,
209 131
,
243
Deferred:
Federal
(
11
,
124
)
(
43
,
913
)
(
47
,
105
)
State --- --- ---
Forei
g
n
(
2
,
223
)
(
8
,
566
)
(
7
,
754
)
(
13
,
347
)
(
52
,
479
)
(
54
,
859
)
Charge in lieu of taxes attributable to tax benefit
from em
p
lo
y
ee stock o
p
tions 5,321 10,456 45,493
Tota
l
$
17
,
119 70
,
186 121
,
877
Deferred taxes are recorded based upon differences between the financial statement basis and tax basis of
assets and liabilities and available tax loss and credit carryforwards.
The following deferred taxes are recorded:
Assets/(liabilities)
June 30
,
($000s omitted) 2008 2007
Federal tax credits $ 203,535 206,110
Inventory costing differences 12,285 8,816
Capitalized research and development 63,104 52,925
Foreign tax loss and credit carryforwards 18,089 23,475
Non-qualified stock options – GAAP deductions 16,212 12,075
Valuations and other allowances 75,463 64,014
Total gross deferred tax asset $ 388,688 367,415
Less valuation allowance (120,220) (110,765)
Deferred tax asset $ 268,468 256,650
Total gross deferred tax liability from fixed asset depreciation $ (9,301) (8,545)
Foreign statutory accounting including royalty payments (14,206) (18,906)
Total gross deferred tax liability $ (23,507) (27,451)
Net deferred tax asset $ 244,961 229,199
We have Federal research credit, alternative minimum tax credit and foreign income tax credit
carryforwards valued at $23.9 million, $1.9 million and $177.7 million at June 30, 2008. The research
credit carryforward will begin to expire in 2021. The alternative minimum tax credit does not expire. The
foreign tax credit will begin to expire in 2013. A $107.7 million valuation allowance has been recorded
for U. S. Federal foreign tax credits. Additionally, we have an Austrian net operating loss carryforward
valued at $4.3 million that will not expire and other foreign tax loss carryforwards before valuation
allowance of $18.1 million that do not expire. A valuation allowance of $12.6 million has been
established for certain of the foreign net operating loss carryforwards. Management believes the results
of future operations will generate sufficient taxable income to realize the net deferred tax asset.