TiVo 2008 Annual Report Download - page 86

Table of Contents
The tax effects of temporary differences that give rise to significant portions of the Company's deferred tax assets are presented below:
Fiscal Year Ended January 31,
2009 2008
Deferred tax assets: (in thousands)
Net operating loss carryforwards $ 140,074 $ 163,115
Research and alternative minimum tax credits 11,151 8,135
Deferred revenue & rent 19,773 39,923
Capitalized Research 33,442 38,194
Other 18,635 17,292
Total deferred tax assets 223,075 266,660
Valuation allowance (223,075) (266,660)
Net deferred tax assets (liabilities): $ — $ —
Realization of deferred tax assets is dependent upon generation of future taxable income, the timing and amount of which are uncertain. Accordingly,
Management has established a valuation allowance for the portion of deferred tax assets for which realization is uncertain. The net change in the total
valuation allowance was a decrease of $43.6 million and increase of $0.8 million for the year ended January 31, 2009 and January 31, 2008, respectively.
As of January 31, 2009, the Company had net operating loss carryforwards for federal and state income tax purposes of approximately $410 million and
$119 million respectively, available to reduce future income subject to income taxes. Of these amounts, approximately $24 million represent federal and state
tax deductions from stock option compensation. The tax benefit from these deductions will be recorded as an adjustment to additional paid-in capital in the
year in which the benefit is realized.
Federal and state laws impose restrictions on the utilization of net operating loss and tax credit carryforwards in the event of an "ownership change," as
defined in Section 382 of the Internal Revenue Code. The Company has determined that there have been multiple ownership changes since inception of the
Company. However, the ownership changes, do not place any limitation on the utilization of net operating losses and tax credit carryforwards.
The federal net operating loss carryforwards expire beginning in fiscal year ending 2012 through 2027. The state net operating loss carryforwards
expire beginning in fiscal year 2014 through 2019. As of January 31, 2009, unused research and development tax credits of approximately $10.0 million and
$11.4 million, respectively, are available to reduce future federal and California income taxes. The federal research credit carryforwards will begin to expire,
if not utilized, by 2012. California research and experimental tax credits carry forward indefinitely until utilized.
On September 23, 2008, California signed into legislation the Assembly Bill 1452 which suspends for two years the deduction for net operating losses
(NOLs) on a California tax return. Accordingly, a deduction for net operating loss carryovers will not be allowed for the Company's tax years 2008 and 2009.
Also, Assembly Bill 1452 places restriction on the amount of allowable tax credit a company can utilize for the tax years 2008 and 2009. Under the new
California legislation a taxpayer cannot use otherwise allowable tax credit to reduce below 50% its "net tax". Credits affected by this limitation include the
research and development credit, the enterprise zone credit, and the low-income housing credit. The carryover period for any NOL, or NOL carryover that is
not allowed due to the suspension is extended by one additional year for losses incurred in tax years beginning in 2008, and two additional years for losses
incurred in tax years beginning before January 1, 2008.
The Housing Assistance Tax Act of 2008 (H.R. 3221), signed into law on July 30, 2008, allowed corporations without current tax liabilities to obtain
refunds for certain research tax credit and alterative minimum tax credit carryforwards by electing to forego the 50% additional first year depreciation for new
property acquired after March 31, 2008 and placed in service before January 1, 2009. The Company has elected to obtain refunds for its research and
development tax credit during the year ended January 31, 2009. The amount of benefit for refundable credit for fiscal year 2009 is approximately $0.2 million.
83