Salesforce.com 2011 Annual Report Download - page 92

A reconciliation of income taxes at the statutory federal income tax rate to the provision for income taxes
included in the accompanying consolidated statements of operations is as follows (in thousands):
Fiscal Year Ended January 31,
2011 2010 2009
U.S. federal taxes at statutory rate .......................... $36,504 $49,833 $29,957
State, net of the federal benefit ............................. 6,069 8,645 4,685
Foreign losses providing no benefit ......................... 0 0 3,091
Foreign taxes in excess of the U.S. statutory rate ............... 3,412 6,748 3,537
Tax credits ............................................. (13,625) (9,845) (5,222)
Non-deductible expenses ................................. 2,621 755 901
Impact of California tax law change ......................... 2,199 2,747 0
Tax—noncontrolling interest .............................. (1,825) (1,390) 0
Other, net .............................................. (754) 196 608
$ 34,601 $57,689 $37,557
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,
2011 2010
Deferred tax assets:
Net operating loss carryforwards ............................... $ 21,929 $ 5,284
Deferred stock compensation .................................. 31,872 30,451
Tax credits ................................................. 39,065 20,836
Deferred rent expense ........................................ 8,371 7,360
Accrued liabilities ........................................... 29,549 22,006
Deferred revenue ............................................ 9,727 10,802
Other ..................................................... 4,508 4,798
Total deferred tax assets .......................................... 145,021 101,537
Less valuation allowance ......................................... (1,142) (1,540)
Net deferred tax assets ............................................ 143,879 99,997
Deferred tax liabilities:
Deferred commissions ........................................ (27,739) (22,613)
Purchased intangibles ........................................ (24,856) (3,280)
Unrealized gains on investments ................................ (5,005) (3,873)
Depreciation and amortization ................................. (13,500) (229)
Other ..................................................... (4,064) (2,307)
Total deferred tax liabilities ....................................... (75,164) (32,302)
Net deferred tax assets ............................................ $ 68,715 $ 67,695
Realization of deferred tax assets is dependent on future earnings, if any, the timing and amount of which
are uncertain. Accordingly, the deferred tax assets have been partially offset by a valuation allowance. The
valuation allowance relates to net deferred tax assets from operating losses of certain foreign subsidiaries. The
excess tax benefits associated with stock option exercises are recorded directly to stockholders’ equity
controlling interest only when realized. As a result, the excess tax benefits included in net operating loss
carryforwards but not reflected in deferred tax assets for fiscal year 2011 and 2010 are $80.6 million and $8.5
million, respectively.
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