United Airlines 2011 Annual Report Download - page 112

Table of Contents
  




Income tax provision at statutory rate $(234) $(225) $(154)
State income taxes, net of federal income tax benefit 5 6 (9)
Nondeductible employee meals 6 6 4
Nondeductible interest expense 12 12 —
Medicare Part D Subsidy (7) (7) —
Valuation allowance 190 182 158
Share-based compensation 7 7 —
Tax benefit resulting from intraperiod tax allocation — — (158)
Other, net 4 3 2
$(17) $ (16) $ (157)
State tax benefit recorded in 2011 resulted from certain adjustments to existing state tax net operating losses, such benefit was fully offset by an increase in the
valuation allowance.
We are required to consider all items of income (including items recorded in other comprehensive income) in determining the amount of tax benefit that should
be allocated to a loss from continuing operations. As a result, Continental Successor and Continental Predecessor recorded $6 million and $158 million of
non-cash tax benefits on its loss from continuing operations for the three months ended December 31, 2010 and the year ended December 31, 2009,
respectively, which were exactly offset by income tax expense in other comprehensive income, a component of stockholder’s equity. Because the income tax
expense on other comprehensive income is equal to the income tax benefit from continuing operations, Continental’s net deferred tax positions at December 31,
2010 and 2009 were not impacted by this tax allocation.
Temporary differences and carryforwards that give rise to deferred tax assets and liabilities at December 31, 2011 and 2010 were as follows (in millions):
  
  
     
Deferred income tax asset (liability):
Federal and state net operating loss (“NOL”) carryforwards $2,911 $ 3,429 $2,024 $2,217 $ 835 $1,179
Frequent flyer deferred revenue 2,386 2,358 1,487 1,609 903 752
Employee benefits, including pension, postretirement and medical 1,897 1,741 1,275 1,272 703 551
Lease fair value adjustment 376 504 — — 376 504
AMT credit carryforwards 268 268 263 263 5 5
Restructuring charges 50 69 50 69 — —
Other assets 1,201 1,031 510 388 581 495
Less: Valuation allowance (4,137) (4,171) (2,614) (2,624) (1,434) (1,384)
Total deferred tax assets $4,952 $5,229 $2,995 $ 3,194 $1,969 $ 2,102
Depreciation, capitalized interest and other $(3,860) $(4,091) $(2,303) $(2,463) $(1,554) $(1,625)
Intangibles (1,627) (1,699) (833) (849) (795) (850)
Other liabilities (453) (433) (218) (240) (173) (186)
Total deferred tax liabilities $ (5,940) $ (6,223) $(3,354) $(3,552) $(2,522) $(2,661)
Net deferred tax liability $ (988) $ (994) $ (359) $(358) $ (553) $(559)
As a result of the Merger, beginning October 1, 2010, Continental and its domestic consolidated subsidiaries joined the UAL federal consolidated tax return
filing group, which also includes United and its domestic consolidated subsidiaries. Consolidated current and deferred tax expense was allocated to each of
United and Continental using a method that treats each entity as though it had filed a separate tax return. Under the Company’s tax agreement, group members
are compensated for their losses and other tax benefits only if they
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