Hertz 2012 Annual Report Download - page 164

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, 2012
and 2011 are as follows (in millions of dollars):
2012 2011
Deferred Tax Assets:
Employee benefit plans ....................................... $ 103.6 $ 102.8
Net operating loss carryforwards ................................ 1,610.9 1,743.5
Foreign tax credit carryforwards ................................. 20.8 20.8
Federal, state and foreign local tax credit carryforwards ............... 26.8 15.0
Accrued and prepaid expenses ................................. 323.1 300.8
Total Deferred Tax Assets ..................................... 2,085.2 2,182.9
Less: Valuation Allowance ..................................... (226.4) (186.7)
Total Net Deferred Tax Assets .................................. 1,858.8 1,996.2
Deferred Tax Liabilities:
Depreciation on tangible assets ................................. (3,081.4) (2,742.3)
Intangible assets ........................................... (1,477.1) (942.4)
Total Deferred Tax Liabilities ................................... (4,558.5) (3,684.7)
Net Deferred Tax Liability ...................................... (2,699.7) (1,688.5)
As of December 31, 2012, deferred tax assets of $1,294.3 million were recorded for unutilized U.S.
Federal Net Operating Losses, or ‘‘NOL,’’ carry forwards of $3,697.9 million. The total Federal NOL carry
forwards are $3,775.0 million of which $77.1 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 $27.0 million will be recorded to Additional paid-in capital.
The Federal NOLs begin to expire in 2025. State NOLs exclusive of the effects of the excess tax
deductions, have generated a deferred tax asset of $105.8 million. The state NOLs expire over various
years beginning in 2013 depending upon particular jurisdiction.
On January 1, 2009, Bank of America acquired Merrill Lynch. 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 limitations 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, 2012, deferred tax assets of $248.5 million were recorded for foreign NOL carry
forwards of $1,049.0 million. A valuation allowance of $200.6 million at December 31, 2012 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 carry forwards may not be utilized in the future.
The foreign NOL carry forwards of $1,049.0 million include $775.5 million which have an indefinite carry
forward period and associated deferred tax assets of $170.6 million. The remaining foreign NOLs of
$273.5 million are subject to expiration beginning in 2015 and have associated deferred tax assets of
$77.9 million.
As of December 31, 2012, deferred tax assets for U.S. Foreign Tax Credit carry forwards were
$20.8 million which relate to credits generated as of December 31, 2007. The carry forwards will begin to
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