Shutterfly 2011 Annual Report Download - page 67

Note 8 — Income Taxes
The components of the provision for income taxes are as follows (in thousands):
The Company’s actual tax expense (benefit) differed from the statutory federal income tax rate of 34.0%, as follows:
At December 31, 2010, the Company had approximately $32.7 million of state net operating loss carryforwards to reduce future regular
taxable income, of which $10.3 million is associated with windfall tax benefits that will be recorded as additional paid-
in capital when realized.
These carryforwards will expire beginning in the year 2016 for state purposes, if not utilized. The Company recognized the remaining federal
net operating loss carryforward in 2010, except for federal net operating losses associated with the Company's acquisition of TinyPictures in the
amount of $1.5 million.
The Tax Reform Act of 1986 limits the use of net operating loss and tax credit carryforwards in the case of an “ownership change”
of a
corporation or separate return loss year limitations. Any ownership changes, as defined, may restrict utilization of carryforwards.
The Company also had federal and state research and development credit carryforwards of approximately $3.4 million and $2.2 million for
federal and state income tax purposes, respectively, at December 31, 2010. The research and development credits may be carried forward over a
period of 20 years for federal tax purposes, indefinitely for California tax purposes, and 15 years for Arizona purposes. The research and
development tax credit will expire starting in 2018 for federal and 2023 for Arizona.
The components of the net deferred tax assets as of December 31, 2010 and 2009 are as follows (in thousands):
As of January 1, 2010, the Company had $2,179,000 of unrecognized tax benefits. As of December 31, 2010, the Company booked an
additional $776,000 for unrecognized tax benefits for fiscal 2010. A reconciliation of the beginning and ending amounts of unrecognized
income tax benefits during the twelve month periods ended December 31, 2010, 2009 and 2008 is as follows (in thousands):
Table of Contents
December 31,
2010
2009
2008
Federal:
Current
$
5,773
$
5,440
$
727
Deferred
2,247
(2,162
)
2,640
8,020
3,278
3,367
State:
Current
294
977
1,156
Deferred
(226
)
(741)
(2,952)
68
236
(1,796)
Total income tax expense (benefit):
Current
6,067
6,417
1,883
Deferred
2,021
(2,903)
(312)
$
8,088
$
3,514
$
1,571
December 31,
2010
2009
2008
Income tax expense at statutory rate
34.0
%
34.0
%
34.0
%
State income taxes
1.7
%
3.5
%
(3.7)
%
Stock
-
based compensation
(0.4)
%
6.2
%
16.7
%
R&D tax credit
(2.6)
%
(6.3)
%
(17.4)
%
Other
(0.6)
%
0.1
%
0.4
%
32.1
%
37.5
%
30.0
%
December 31,
2010
2009
Deferred tax assets:
Net operating loss carryforwards
$
1,818
$
1,837
Reserves and other tax benefits
7,854
6,909
Tax credits
6,128
4,508
Depreciation and amortization
—
2,897
Other
725
766
Deferred tax assets
16,525
16,917
Deferred tax liabilities:
Depreciation and amortization
(1,629
)
—
Net deferred tax assets
$
14,896
$
16,917