SkyWest Airlines 2015 Annual Report Download - page 79

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For the year ended December 31, 2015, the Company released a $0.9 million valuation allowance against
certain deferred tax assets primarily associated with ExpressJet state net operating losses with a limited carry forward
period. The release of the valuation allowance was based on the Company's gain resulting from the early retirement of
certain long term debt which reduced the amount of deferred tax assets that were anticipated to expire before the deferred
tax assets may be utilized.
For the year ended December 31, 2014, the Company recorded a $6.0 million valuation allowance against
certain deferred tax assets primarily associated with ExpressJet state net operating losses with a limited carry forward
period. The valuation allowance was based on the Company’s assessment of deferred tax assets that are anticipated to
expire before the deferred tax assets may be utilized. The Company additionally recorded a $2.0 million foreign tax
expense associated with Brazilian withholding tax on the sale of the Company's equity ownership in TRIP.
For the year ended December 31, 2013, the Company recorded a $1.4 million valuation allowance against
certain deferred tax assets primarily associated with ExpressJet state net operating losses with a limited carry forward
period. The valuation allowance was based on the Company’s assessment at December 31, 2013 of deferred tax assets
that were anticipated to expire before the deferred tax assets may be utilized.
The significant components of the Company’s net deferred tax assets and liabilities as of December 31, 2015
and 2014 are as follows (in thousands):
As of December 31,
2015 2014
Deferred tax assets:
Intangible Asset .............................. $ 30,369 $ 34,819
Accrued benefits .............................. 47,514 43,853
Net operating loss carryforward ................. 82,211 152,361
AMT credit carryforward ...................... 21,391 17,590
Deferred aircraft credits ........................ 55,544 53,797
Accrued reserves and other ..................... 24,575 27,008
Total deferred tax assets .......................... 261,604 329,428
Valuation allowance ............................. (8,126) (9,025)
Deferred tax liabilities:
Accelerated depreciation . . . . . . . . . . . . . . . . . . . . . . . (902,322) (895,405)
Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . (902,322) (895,405)
N
et deferred tax liability .......................... $ (648,844) $ (575,002)
The Company’s deferred tax liabilities were primarily generated through accelerated depreciation, combined
with shorter depreciable tax lives, allowed under the IRS tax code for purchased aircraft and support equipment
compared to the Company’s US GAAP depreciation policy for such assets using the straight-line method (see note 1
Nature of Operations and Summary of Significant Accounting Policies).
The Company's valuation allowance is related to certain deferred tax assets with a limited carry forward period.
The Company does not anticipate utilizing these deferred tax assets prior to the lapse of the carry forward period.
At December 31, 2015 and 2014, the Company had federal net operating losses, net of valuation allowance, of
approximately $189.0 million and $379.3 million and state net operating losses of approximately $352.2 million and
$452.2 million, respectively. The estimated effective tax rate applicable to the state and federal net operating losses net
of valuation allowances as of December 31, 2015 was 35.0% and 2.6%, respectively. The Company anticipates that the
federal and state net operating losses will start to expire in 2026 and 2017, respectively. The Company has recorded a
valuation allowance for state net operating losses the Company anticipates will expire before the benefit will be realized
due to the limited carry forward periods. As of December 31, 2015 and 2014, the Company also had an alternative
minimum tax credit of approximately $21.4 million and $17.6 million, respectively, which does not expire.