JetBlue Airlines 2010 Annual Report Download - page 77

The components of our deferred tax assets and liabilities as of December 31 are as follows (in millions):
2010 2009
Deferred tax assets:
Net operating loss carryforwards .................................... $186 $203
Employee benefits ............................................... 35 26
Deferred revenue/gains ............................................ 86 82
Derivative instruments ............................................ 6 4
Investment securities ............................................. — 15
Capital loss carryforwards ......................................... 20 5
Other. . ....................................................... 26 21
Valuation allowance .............................................. (21) (25)
Deferred tax assets ............................................. 338 331
Deferred tax liabilities:
Accelerated depreciation .......................................... (576) (512)
Derivative instruments ............................................ — (4)
Deferred tax liabilities .......................................... (576) (516)
Net deferred tax liability ............................................ $(238) $(185)
At December 31, 2010, we had U.S. Federal regular and alternative minimum tax net operating loss
(“NOL”) carryforwards of $519 million and $484 million, respectively, which begin to expire in 2023. In
addition, at December 31, 2010, we had deferred tax assets associated with state NOL and credit
carryforwards of $17 million and $3 million, respectively. The state NOLs begin to expire in 2011, while the
credits carryforward indefinitely. Our NOL carryforwards at December 31, 2010 include an unrecorded benefit
of approximately $9 million related to stock-based compensation that will be recorded in equity when, and to
the extent, realized. Section 382 of the Internal Revenue Code imposes limitations on a corporation’s ability to
use its NOL carryforwards if it experiences an “ownership change.” As of December 31, 2010, our valuation
allowance did not include any amounts attributable to this limitation; however, if an “ownership change” were
to occur in the future, the ability to use our NOLs could be limited.
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, 2010, we
provided a $21 million valuation allowance to reduce the deferred tax assets to an amount that we consider is
more likely than not to be realized. Our valuation allowance at December 31, 2010 includes $20 million
related to a capital loss carryforward which expires in 2015 and 2016.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follow (in
millions):
Unrecognized tax benefits December 31, 2007 . . . .......................... $ 2
Increases for tax positions taken during the period .......................... 6
Unrecognized tax benefits December 31, 2008 . . . .......................... $ 8
Increases for tax positions taken during the period .......................... 1
Unrecognized tax benefits December 31, 2009 . . . .......................... $ 9
Increases for tax positions taken during the period .......................... 2
Unrecognized tax benefits December 31, 2010 . . . .......................... $11
Interest and penalties accrued on unrecognized tax benefits were not significant. If recognized, $9 million
of the unrecognized tax benefits at December 31, 2010 would impact our effective tax rate. We do not expect
any significant change in the amount of the unrecognized tax benefits within the next twelve months. As a
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