Hertz 2009 Annual Report Download - page 159

HERTZ GLOBAL HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The principal items of the U.S. and foreign net deferred tax assets and liabilities at December 31, 2009
and 2008 are as follows (in millions of dollars):
2009 2008
Deferred Tax Assets:
Employee benefit plans ..................................... $ 88.0 $ 101.8
Net operating loss carryforwards .............................. 1,135.2 464.7
Foreign tax credit carryforwards ............................... 20.8 20.8
Federal, state and foreign tax credit carryforwards .................. 8.2 8.8
Accrued and prepaid expenses ............................... 206.1 264.9
Total Deferred Tax Assets .................................... 1,458.3 861.0
Less: Valuation Allowance ................................... (167.8) (123.2)
Total Net Deferred Tax Assets ................................. 1,290.5 737.8
Deferred Tax Liabilities:
Depreciation on tangible assets ............................... (1,694.4) (1,165.9)
Intangible assets .......................................... (1,067.0) (1,053.8)
Total Deferred Tax Liabilities .................................. (2,761.4) (2,219.7)
Net Deferred Tax Liability .................................. $(1,470.9) $(1,481.9)
As of December 31, 2009, deferred tax assets of $821.6 million were recorded for unutilized U.S. Federal
Net Operating Losses, or ‘‘NOL,’’ carryforwards of $2,352.8 million. The total Federal NOL carry forwards
are $2,363.7 million of which $10.9 million relate to excess tax deductions associated with stock option
plans which have yet to reduce taxes payable. Upon the utilization of these carry forwards, the
associated tax benefits of approximately $3.8 million will be recorded to Additional Paid-in Capital. The
Federal NOLs begin to expire in 2025. State NOLs associated with the Federal NOL, exclusive of the
effects of the excess tax deductions; have generated a deferred tax asset of $135.0 million. The state
NOLs begin to expire in 2010.
On January 1, 2009, Bank of America acquired a majority equity interest in Merrill Lynch & Co. For U.S.
income tax purposes the transaction, when combined with other unrelated transactions during the
previous 36 months, resulted in a change in control as that term is defined in Section 382 of the Internal
Revenue Code. Consequently, utilization of all pre-2009 U.S. net operating losses is subject to an annual
limitation. We have calculated the expected annual base limitation as well as additional limitation
resulting from a net unrealized built in gain as of the acquisition date and other adjustments. Based on
the calculations, the limitation is not expected to result in a loss of net operating losses or have a material
adverse impact on taxes.
As of December 31, 2009, deferred tax assets of $178.0 million were recorded for foreign NOL
carryforwards of $754.8 million. A valuation allowance of $123.2 million at December 31, 2009 was
recorded against these deferred tax assets because those assets relate to jurisdictions that have
historical losses and the likelihood exists that a portion of the NOL carryforwards may not be utilized in
the future. An additional valuation allowance of $31.1 million at December 31, 2009 was recorded
against foreign deferred tax assets related to other cumulative temporary differences.
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