NetSpend 2010 Annual Report Download - page 104

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Table of Contents
NetSpend Holdings, Inc.
Notes to Consolidated Financial Statements (Continued)
December 31, 2008, 2009 and 2010
NOTE 15: INCOME TAXES (Continued)
As of December 31, 2010, the Company had approximately $0.3 million of federal net operating losses remaining with limitations on the
amount that can be recognized in any annual period.
The exercise of certain Company stock options results in compensation which is includable in the taxable income of the exercising option
holder and deductible by the Company for federal and state income tax purposes. Such compensation results from increases in the fair market
value of the Company's common stock subsequent to the date of grant of the exercised stock options. Any option related excess tax benefits
(tax deduction greater than cumulative book deduction) are recorded as an increase to additional paid-in capital, while option related tax
deficiencies (cumulative book deduction greater than tax deduction) are recorded as a decrease to additional paid-in capital to the extent of the
Company's additional paid-in capital option pool, then to income tax provision. During the year ended December 31, 2008, option-related tax
deductions resulted in increases to additional paid-in capital of less than $0.1 million. During the year ended December 31, 2009, the shortfall
related to the Company's stock-options resulted in a decrease to additional paid-in-capital of $0.2 million. During the year ended December 31,
2010, option-related tax deductions resulted in increases to additional paid-in capital of $1.5 million.
The Company's provision for income taxes differs from the expected tax expense (benefit) amount computed by applying the statutory
federal income tax rate of 35% to income (loss) before income taxes for the years ended December 31, 2008, 2009 and 2010 primarily as a
result of the following:
For the years ended December 31, 2009 and 2010, the total amount of unrecognized tax benefits was as follows:
97
2008 2009 2010
Federal statutory rate
(35.0
)%
35.0
%
35.0
%
State taxes, net of federal benefit
3.9
3.3
3.1
Permanent items
0.7
0.2
(0.1
)
Stock compensation
6.9
2.8
(0.8
)
Goodwill impairment
185.6
—
—
Other
6.3
(0.6
)
(1.2
)
Provision for income tax
168.4
%
40.7
%
36.0
%
2009 2010
(in thousands of dollars)
Balance as of beginning of year
$
1,892
$
195
Tax positions related to current year:
Additions
—
187
Reductions
—
—
Tax positions related to prior years:
Additions
85
19
Reductions
(1,723
)
—
Settlements
(59
)
—
Balance as of end of year
$
195
$
401