Twenty-First Century Fox 2006 Annual Report Download - page 110

News Corporation
Notes totheConsolidated Financial Statements (CONTINUED)
In October 2004, the American Jobs Creation Act (the “AJCA”) was signed into law. The AJCA includes a temporary
incentive for U.S. multinationals to repatriate foreign earnings at the favorable effective tax rate of 5.25%. Such repa-
triations mustoccur in either an enterprise’s last tax year that began before the enactment date or the first tax year that
begins during the one-year period beginning on the date of enactment. In accordance with the AJCA, the Company repa-
triated $426 million at afavorable tax rate of 5.25%, which resulted in ataxbenefit totheCompany of approximately $126
million. The amounts repatriated will be usedto compensate non-executive U.S. employees for services performed within
the UnitedStates.
The reconciliation of income tax attributable to continuing operations computed at the statutory rate to income tax
expense is:
For the years ended June 30, 2006 2005 2004
US federal income tax rate 35% 35% 35%
State and local taxes 211
Effect of foreign taxes 11—
Gain for which no expense was recognized —— 1
Permanent basis difference on sale of investment —— (5)
AJCA Section 965 Benefit (3) — —
Resolution of tax matters —(3)—
Change in valuation allowance (1) (1) 8
Other permanent differences 11(3)
Effective tax rate 35% 34% 37%
The following is asummary of the components of the deferred tax accounts:
2006 2005
As of June 30, (in millions)
Deferred tax assets:
Net operating loss carryforwards $ 874 $971
Capital loss carryforwards 1,107 508
Total deferred tax assets 1,981 1,479
Deferred tax liabilities, net:
Accrued Liabilities 172 316
Amortization andbasis difference (4,872) (4,827)
Revenue recognition (228) (187)
Sports rights contracts (78) (118)
Other (205) (1)
Total deferred tax liabilities (5,211) (4,817)
Net deferred tax liabilities before valuation allowance (3,230) (3,338)
Less: valuation allowance (1,877) (1,324)
Net deferred tax liabilities $(5,107) $(4,662)
At June 30, 2006 and 2005, the Company had net current deferred tax assets of $18 million and$155 million, respectively,
and non-current deferred tax asset of $75 million and$0,respectively. The Company also had non-current deferred tax
liabilities of $5,200 million and$4,817 million at June 30, 2006 and 2005, respectively.
At June 30, 2006, the Company had approximately $2.7 billion of net operating and $3.6 billion of capital loss carryfor-
wards available to offset future taxable income. The majority of these net operating loss carryforwards, if not utilized to
reduce taxable income in future periods, will expire in varyingamounts between 2007 and 2025, with asignificant portion,
approximately $2 billion relatingto foreign operations, expiring within the next five years. While approximately $800 mil-
lion of the capital loss carryforwards expire in five years, the remaining capital loss carryforwards are in jurisdictionswhere
they do not expire. In assessingtherealizability of deferred tax assets, management evaluates a variety of factors in
considering whether it is more likely than not that some portion or all of the deferred tax assets will ultimately be realized.
Management considers earnings expectations,theexistence of taxable temporary differences, tax planning strategies, and
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