Salesforce.com 2007 Annual Report Download - page 81

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Table of Contents
salesforce.com, inc.
Notes to Consolidated Financial Statements—(Continued)
A reconciliation of income taxes at the statutory federal income tax rate to the provision (benefit) for income taxes included in the accompanying
consolidated statements of operations is as follows (in thousands):
Fiscal Year Ended January 31,
2008 2007 2006
U.S. federal taxes at statutory rate $ 16,175 $ 4,374 $ 9,869
State, net of the federal benefit 2,916 1,146 360
Foreign losses providing no benefit 4,547 3,766 1,978
Previously unbenefitted tax assets — — (5,210)
Foreign taxes in excess of the U.S. statutory rate 3,296 1,889 280
Tax credits (3,817) (2,851) (2,314)
Change in valuation allowance (970) — (7,225)
Non-deductible expenses 1,346 1,762 428
Other, net (108) (291) 524
$ 23,385 $ 9,795 $ (1,310)
Deferred income taxes reflect the net tax effect of temporary differences between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for income tax purposes. Significant components of the Company's deferred tax assets and liabilities were as follows (in
thousands):
As of January 31,
2008 2007
Deferred tax assets:
Net operating loss carryforwards $ 7,096 $ 6,403
Deferred stock compensation 16,347 10,786
Tax credits 8,135 6,051
Deferred rent expense 5,530 2,316
Accrued liabilities 7,273 4,116
Deferred revenue 8,447 5,173
Other 6,825 2,494
Total deferred tax assets 59,653 37,339
Less valuation allowance (1,650) (1,681)
Total deferred tax assets 58,003 35,658
Deferred tax liabilities:
Deferred commissions (16,562) (11,842)
Purchased intangibles (3,756) (1,889)
Unrealized gains on investments (1,321) —
Other (2,679) (1,074)
Total deferred tax liabilities (24,318) (14,805)
Net deferred tax assets $ 33,685 $ 20,853
Realization of deferred tax assets is dependent on future earnings, if any, the timing and amount of which are uncertain. Accordingly, the gross deferred
tax assets have been partially offset by a valuation allowance. The valuation allowance relates primarily to deferred tax assets arising from operating losses
from foreign subsidiaries. Since the adoption of SFAS 123R, excess tax benefits associated with stock option exercises are recorded directly to stockholders'
equity only when realized. As a result, the Company did not recognize deferred tax assets of approximately $60.2 million for net operating loss carryforwards
generated from these excess tax benefits.
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