JetBlue Airlines 2006 Annual Report Download - page 70

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):
2006 2005 2004
Income tax expense (benefit) at statutory rate...................... $ 3 $ (8) $ 26
Increase (decrease) resulting from:
State income tax, net of federal benefit .......................... — (2) 1
Stock-based compensation ..................................... 4 3 1
Non-deductible meals and entertainment ........................ 2 1 1
Valuation allowance........................................... 1 2 —
Total income tax expense (benefit)................................ $ 10 $ (4) $ 29
Cash payments for income taxes were zero in 2006 and $1 million in both 2005 and 2004.
The net deferred taxes below include a current net deferred tax asset of $25 million and a
long-term net deferred tax liability of $136 million at December 31, 2006, and a current net deferred
tax asset of $10 million and a long-term net deferred tax liability of $116 million at
December 31, 2005.
The components of our deferred tax assets and liabilities as of December 31 are as follows (in
millions):
2006 2005
Deferred tax assets:
Net operating loss carryforwards .................................. $ 233 $ 230
Employee benefits .............................................. 13 9
Gains from sale and leaseback of aircraft .......................... 11 5
Tax credits carryforwards ........................................ 5 4
Rent expense ................................................... 7 3
Deferred revenue ............................................... 19 6
Derivative losses ................................................ 6 —
Other.......................................................... 10 8
Valuation allowance ............................................. (3) (2)
Deferred tax assets ............................................ 301 263
Deferred tax liabilities:
Accelerated depreciation......................................... (412) (369)
Net deferred tax liability ........................................... $ (111) $ (106)
For financial reporting purposes, a valuation allowance has been recognized at December 31, 2006
to reduce the deferred tax assets associated with certain of our state income tax net operating loss
carryforwards, as realization is not likely.
At December 31, 2006, we had regular and alternative minimum tax net operating loss
carryforwards of $612 million and $439 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 2027 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 3%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, adjusted for stock option
compensation expense, subject to Board of Director approval, is distributed on a pro rata basis based
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