JetBlue Airlines 2005 Annual Report Download - page 67

The effective tax rate on income (loss) before income taxes differed from the federal income tax
statutory rate for the years ended December 31 for the following reasons (in millions):
2005 2004 2003
Income tax expense (benefit) at statutory rate...................... $ (8) $ 26 $ 61
Increase (decrease) resulting from:
State income tax, net of federal benefit .......................... (2) 1 9
Non-deductible meals and entertainment ........................ 1 1 1
Stock-based compensation ..................................... 3 1 —
Valuation allowance........................................... 2 — —
Total income tax expense (benefit)................................ $ (4) $ 29 $ 71
Cash payments for income taxes were $1 million, $1 million and $2 million in 2005, 2004 and
2003, respectively.
The net deferred taxes below include a current net deferred tax asset of $11 million and a
long-term net deferred tax liability of $117 million at December 31, 2005, and a current net deferred
tax liability of $2 million and a long-term net deferred tax liability of $121 million at
December 31, 2004.
The components of our deferred tax assets and liabilities as of December 31 are as follows (in
millions):
2005 2004
Deferred tax assets:
Net operating loss carryforwards................................ $ 272 $ 144
Employee benefits ............................................ 9 5
Gains from sale and leaseback of aircraft ........................ 5 2
Tax credits carryforwards...................................... 4 2
Rent expense ................................................ 2 2
Other ....................................................... 3 1
Valuation allowance........................................... (2) —
Deferred tax assets ......................................... 293 156
Deferred tax liabilities:
Accelerated depreciation ...................................... (399) (271)
Derivative gains .............................................. — (8)
Net deferred tax liability......................................... $ (106) $ (123)
For financial reporting purposes, a valuation allowance has been recognized at December 31, 2005
to reduce the deferred tax assets associated with certain of the Company’s state income tax net
operating loss carryforwards, as realization is not likely.
At December 31, 2005, the Company had regular and alternative minimum tax net operating loss
carryforwards of $687 million and $493 million, respectively, available for carryforward to reduce the
tax liabilities of future years. The net operating loss carryforwards begin to expire in 2021 for federal
purposes and between 2010 and 2026 for state purposes.
Note 10—Employee Retirement Plan
We sponsor a retirement savings 401(k) defined contribution plan, or the Plan, covering all of our
employees. We match 100%of our employee contributions up to three percent of their compensation
in cash, which then vests over five years. Participants are immediately vested in their voluntary
contributions. We have a profit sharing retirement plan as a separate component of the Plan for all of
our employees under which an award pool consisting of 15%of our pre-tax earnings, subject to Board
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