NetFlix 2014 Annual Report Download - page 67

Table of Contents
U.S. income taxes and foreign withholding taxes associated with the repatriation of earnings of foreign subsidiaries were not provided for
on a cumulative total of $29.2 million
of undistributed earnings for certain foreign subsidiaries as of December 31, 2014. The Company intends
to reinvest these earnings indefinitely in its foreign subsidiaries. If these earnings were distributed to the United States in the form of dividends
or otherwise, the Company would be subject to additional U.S. income taxes net of available foreign tax credits associated with these earnings.
The amount of unrecognized deferred income tax liability related to these earnings is approximately $10.2 million .
Income tax benefits attributable to the exercise of employee stock options of $88.9 million , $80.0 million and $4.4 million for the years
ended December 31, 2014 , 2013 and 2012 , respectively, were 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 income taxes is as follows:
The components of deferred tax assets and liabilities were as follows:
Deferred tax assets include $13.4 million and $21.5 million classified as “Other current assets” and $106.9 million and $69.1 million
classified as “Other non-current assets” in the Consolidated Balance Sheets as of December 31, 2014 and 2013 , respectively. 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, 2014 and 2013 , it was considered more likely than not that substantially all deferred tax assets would be realized, and no
significant valuation allowance was recorded.
As of December 31, 2014, the Company's state tax credit carryforwards for tax return purposes were $41.9 million , of which $41.1
million can be carried forward indefinitely and $0.8 million expire in 2024.
On December 19, 2014, the Tax Increase Prevention Act of 2014 (H.R.5771) was signed into law which retroactively extends the Federal
research and development credit from January 1, 2014 through December 31, 2014. As a result, the Company recognized the retroactive benefit
of the Federal research and development credit of approximately $10.7 million as a discrete item in the fourth quarter of 2014, the period in
which the legislation was enacted.
60
Year Ended December 31,
2014
2013 2012
(in thousands)
Expected tax expense at U.S. federal statutory rate of 35%
$
122,279
$
59,878
$
10,667
State income taxes, net of Federal income tax effect
13,274
8,053
2,914
R&D tax credit
(18,655
)
(13,841
)
(1,803
)
Release of tax reserves on previously unrecognized tax benefits
(38,612
)
—
—
Other
4,284
4,581
1,550
Provision for income taxes
$
82,570
$
58,671
$
13,328
As of December 31,
2014
2013
(in thousands)
Deferred tax assets (liabilities):
Stock-based compensation
$
100,397
$
69,201
Accruals and reserves
13,415
13,022
Depreciation and amortization
(11,708
)
(11,159
)
R&D credits
21,014
19,196
Other
(2,778
)
824
Total deferred tax assets
120,340
91,084
Valuation allowance
—
(
481
)
Net deferred tax assets
$
120,340
$
90,603