US Airways 2007 Annual Report Download - page 162

Table of Contents
US Airways, Inc.
Notes to Consolidated Financial Statements — (Continued)
As of December 31, 2007, US Airways has approximately $761 million of gross NOL to reduce future federal taxable income. Of
this amount, approximately $649 million is available to reduce federal taxable income in the calendar year 2008, as result of the February
2007 ownership change discussed above for US Airways Group. The NOL expires during the years 2022 through 2025. US Airways'
deferred tax asset, which includes the $649 million of NOL discussed above, has been subject to a full valuation allowance. US Airways
also has approximately $60 million of tax affected state NOL as of December 31, 2007.
In assessing the realizability of the deferred tax assets, management considers whether it is more likely than not that some portion or
all of the deferred tax assets will be realized. US Airways has recorded a valuation allowance against its net deferred tax asset. The
ultimate realization of deferred tax assets is dependent upon the generation of future taxable income (including reversals of deferred tax
liabilities) during the periods in which those temporary differences will become deductible.
Throughout 2006 and 2007, US Airways utilized NOL that was generated prior to the merger. Utilization of the NOL results in a
corresponding decrease in the valuation allowance. In accordance with SFAS No. 109, as this valuation allowance was established
through the recognition of tax expense, the decrease in valuation allowance offsets US Airways' tax provision dollar for dollar. US
Airways recognized $7 million and $85 million of non-cash income tax expense for the years ended December 31, 2007 and 2006,
respectively, as US Airways utilized NOL that was generated prior to the merger. In accordance with SFAS No. 109, as this was acquired
NOL, the decrease in the valuation allowance associated with this NOL reduced goodwill instead of the provision for income taxes. As of
December 31, 2007, the remaining federal valuation allowance is $40 million, all of which was established through the recognition of tax
expense. In addition, US Airways has $33 million and $3 million, respectively, of unrealized federal and state tax benefit related to
amounts recorded in other comprehensive income. The remaining state valuation allowance is $43 million, of which $19 million was
established through the recognition of tax expense and $24 million is associated with acquired NOL.
US Airways is subject to Alternative Minimum Tax liability ("AMT"). In most cases, the recognition of AMT does not result in tax
expense. However, since US Airways' net deferred tax asset is subject to a full valuation allowance, any liability for AMT is recorded as
tax expense. US Airways recorded AMT expense of $1 million and $10 million for the years ended December 31, 2007 and 2006,
respectively. US Airways also recorded $1 million and $2 million of state income tax related to certain states where NOL was not
available or limited, for the years ended December 31, 2007 and 2006, respectively.
The components of the provision (benefit) for income taxes are as follows (in millions):
Predecessor
Successor Company Company
Three Months Nine Months
Year Ended Year Ended Ended Ended
December 31, December 31, December 31, September 30,
2007 2006 2005 2005
Current provision:
Federal $ 1 $ 10 $ — $ —
State 1 2 — (2)
Total current 2 12 — (2)
Deferred provision:
Federal (1) 77 — —
State 6 9 — —
Total deferred 5 86 — —
Provision (benefit) for income taxes $ 7 $ 98 $ — $ (2)
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