NetFlix 2010 Annual Report Download - page 68

8. Income Taxes
The components of provision for income taxes for all periods presented were as follows:
Year Ended December 31,
2010 2009 2008
(in thousands)
Current tax provision:
Federal ........................................... $ 85,989 $55,104 $41,883
State ............................................. 21,803 14,900 12,063
Total current ................................... 107,792 70,004 53,946
Deferred tax provision:
Federal ........................................... (1,602) 6,568 (3,680)
State ............................................. 653 (240) (1,792)
Total deferred .................................. (949) 6,328 (5,472)
Provision for income taxes ................................ $106,843 $76,332 $48,474
Income tax benefits attributable to the exercise of employee stock options at $62.2 million, $12.4 million
and $4.6 million in 2010, 2009 and 2008, respectively, are recorded directly to additional paid-in-capital.
A reconciliation of the provision for income taxes, with the amount computed by applying the statutory
federal income tax rate to income before provision for income taxes is as follows:
Year Ended December 31,
2010 2009 2008
(in thousands)
Expected tax expense at U.S. federal statutory rate of 35% ...... $ 93,694 $67,267 $46,060
State income taxes, net of Federal income tax effect ............ 15,565 10,350 5,155
R&D tax credit ......................................... (3,254) (1,600) (3,321)
Stock-based compensation ................................ (54) (89) 108
Other ................................................. 892 404 472
Provision for income taxes ................................ $106,843 $76,332 $48,474
The tax effects of temporary differences and tax carryforwards that give rise to significant portions of the
deferred tax assets are presented below:
Year Ended December 31,
2010 2009
(in thousands)
Deferred tax assets/(liabilities):
Accruals and reserves ........................................ $ 1,764 $ 1,144
Depreciation ............................................... (5,970) (3,259)
Stock-based compensation .................................... 19,084 16,824
R&D credits ................................................ 4,351 3,178
Other ..................................................... 461 1,166
Deferred tax assets .............................................. $19,689 $19,053
In evaluating its ability to realize the net deferred tax assets, the Company considered all available positive
and negative evidence, including its past operating results and the forecast of future market growth, forecasted
earnings, future taxable income, and prudent and feasible tax planning strategies. As of December 31, 2010 and
2009, it was considered more likely than not that substantially all deferred tax assets would be realized, and no
valuation allowance was recorded.
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