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TableofContents
VMware, Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)
AreconciliationofVMware’sincometaxratetothestatutoryfederaltaxrateisasfollows:
For the Year Ended December 31,
2015
2014
2013
Statutoryfederaltaxrate 35%
35%
35%
Statetaxes,netoffederalbenefit 1%
1%
1%
Taxratedifferentialforinternationaljurisdictions (20)%
(21)%
(22)%
U.S.taxcredits(1) (2)%
(3)%
(7)%
Permanentitemsandother 4%
4%
5%
Effectivetaxrate 18%
16%
12%
(1) Amountspresentedfor2013includethefederalresearchtaxcreditfor2012asthecreditwasenactedretroactivelythroughDecember31,2013,andpassedby
theUnitedStatesCongressduringJanuary2013.
Deferredtaxassetsandliabilitiesarerecognizedforfuturetaxconsequencesresultingfromdifferencesbetweenthecarryingamountsofassetsandliabilities
andtheirrespectivetaxbasesusingenactedtaxratesineffectfortheyearinwhichthedifferencesareexpectedtobereversed.Significantdeferredtaxassetsand
liabilitiesconsistedofthefollowing(tableinmillions):
December 31,
2015
2014
Deferredtaxassets:
Unearnedrevenues $ 320
$ 296
Accrualsandother 60
67
Stock-basedcompensation 73
90
Taxcreditandnetoperatinglosscarryforwards 162
138
Otherassets,net 19
9
Intangibleandothernon-currentassets 65
—
Basisdifferenceoninvestmentinbusiness 20
20
Grossdeferredtaxassets 719
620
Valuationallowance (144)
(106)
Totaldeferredtaxassets 575
514
Deferredtaxliabilities:
Property,plantandequipment,net (119)
(93)
Intangiblesandotherassets,net —
(8)
Totaldeferredtaxliabilities (119)
(101)
Netdeferredtaxassets $ 456
$ 413
VMwarehasU.S.federalnetoperatinglosscarryforwardsof$118millionfromacquisitionsmadesince2007.Theseoperatinglosscarryforwardsexpireat
differentperiodsthrough2033.Portionsofthesecarryforwardsaresubjecttoannuallimitations.VMwareexpectstobeabletofullyutilizethesenetoperating
lossesagainstfutureincome.VMwarealsohasstatenetoperatinglosscarryforwardsof$144million,resultingfromacquisitionssince2008,expiringatdifferent
periodsthrough2035.
VMwarehasCaliforniaresearchanddevelopment(“R&D”)creditcarryforwardsforincometaxpurposesofapproximately$96millionthatcanbecarried
overindefinitely.VMwarealsohasR&DcreditcarryforwardsforMassachusettsandGeorgiaofapproximately$6millionand$1million,respectively,which
expireatdifferentperiodsthrough2030.VMwarehasnon-U.S.netoperatinglossesof$15millionresultingfromcertainforeignoperationsandnon-U.S.
acquisitionsin2012.Thesenetoperatinglosseshavevariouscarryforwardperiods,includingcertainportionsthatcanbecarriedoverindefinitely.
VMwaredeterminedthattherealizationofdeferredtaxassetsrelatingtoportionsofthestatenetoperatinglosscarryforwards,stateR&Dtaxcredits,capital
losses,andcertainnon-U.S.netoperatinglossesdidnotmeetthemore-likely-than-notthreshold,andaccordingly,avaluationallowanceof$121millionwas
recorded.If,inthefuture,newevidence
76