JetBlue Airlines 2007 Annual Report Download - page 72

The components of our deferred tax assets and liabilities as of December 31 are as follows (in
millions):
2007 2006
Deferred tax assets:
Net operating loss carryforwards .................................. $ 231 $ 233
Employee benefits .............................................. 18 13
Deferred revenue ............................................... 38 19
Other.......................................................... 41 39
Valuation allowance ............................................. (3) (3)
Deferred tax assets ............................................ 325 301
Deferred tax liabilities:
Accelerated depreciation......................................... (463) (412)
Other.......................................................... (13) —
Deferred tax liabilities ........................................ (476) (412)
Net deferred tax liability ........................................... $(151) $(111)
At December 31, 2007, we had regular and alternative minimum tax net operating loss, or NOL,
carryforwards of $618 million and $458 million, respectively, which begin to expire in 2021. In
addition, at December 31, 2007, we had deferred tax assets associated with state NOL and credit
carryforwards of $24 million and $4 million, respectively. The state NOLs begin to expire in 2010
through 2021, while the credits carryforward indefinitely. Our NOL carryforwards at December 31,
2007, include an unrecorded benefit of approximately $9 million related to stock-based compensation
that will be recorded in equity when realized.
In evaluating the realizability of the deferred tax assets, management assesses whether it is more
likely than not that some portion, or all, of the deferred tax assets will be realized. Management
considers, among other things, the generation of future taxable income (including reversals of deferred
tax liabilities) during the periods in which the related temporary differences will become deductible.
At December 31, 2007, we provided a $3 million valuation allowance to reduce the deferred tax assets
to an amount that we consider is more likely than not to be realized.
We adopted the provisions of FASB Interpretation No. 48, Accounting for Uncertainty in Income
Taxes-an Interpretation of FASB Statement No. 109, or FIN 48, on January 1, 2007. Our policy is to
recognize interest and penalties accrued on any unrecognized tax benefits as a component of income
tax expense. We did not have any material uncertain tax positions upon the adoption, as a result,
there were no adjustments to our opening balance of retained earnings. At December 31, 2007, we
have no material unrecognized tax benefits. We have unused U.S. federal and state NOLs for years
2000 through 2007. As such, these years remain subject to examination by the relevant tax authorities.
Note 10—Employee Retirement Plan
We sponsor a retirement savings 401(k) defined contribution plan, or the Plan, covering all of our
employees. In 2007, we matched 100%of our employee contributions up to 5%of their compensation
in cash, which then vests over five years. Prior to 2007, the Company match was up to 3%of
employee contributions. Participants are immediately vested in their voluntary contributions.
A component of the Plan is a profit sharing retirement plan. In 2007, we amended the profit
sharing retirement plan to provide for Company contributions, subject to Board of Director approval,
to be 5%of eligible non-management employee compensation or 15%of pre-tax earnings, whichever
is greater. Prior to the 2007 amendment, we contributed 15%of our pre-tax earnings, adjusted for
stock option compensation expense, which was distributed on a pro rata basis based on employee
compensation. These contributions vest immediately. Our contributions expensed for the Plan in 2007,
2006 and 2005 were $39 million, $13 million and $8 million, respectively. All of 2005 contributions
were related to our 401(k) plan match.
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