XM Radio 2011 Annual Report Download - page 124

SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income
during the periods in which those temporary differences can be carried forward under tax law. Management’s
evaluation of the realizability of deferred tax assets considers both positive and negative evidence, including
historical financial performance, scheduled reversal of deferred tax assets and liabilities, projected taxable
income and tax planning strategies in making this assessment. The weight given to the potential effects of
positive and negative evidence is based on the extent to which it can be objectively verified. We will not release
the valuation allowance until giving consideration to a variety of factors including but not limited to: (a) the
current period realization of NOL carryforwards, (b) three-year cumulative pre-tax income, (c) the current period
taxable income and (d) the expectation of future earnings. After weighting this evidence, management concluded
that it is more likely than not that our deferred tax assets will not be realized, accordingly, a full valuation
allowance was retained at December 31, 2011.
There is no U.S. federal income tax provision as all federal taxable income was offset by utilizing U.S NOL
carryforwards. The state tax provision is primarily related to taxable income in certain states that have suspended
the ability to use NOL carryforwards. The foreign income tax provision is primarily related to foreign
withholding taxes related to royalty income between us and our Canadian affiliate.
As of December 31, 2011 and 2010, the gross liability for income taxes associated with uncertain state tax
positions, including interest, was $1,524 and $942, respectively, in other long-term liabilities. No penalties have
been accrued for. We do not currently anticipate that our existing reserves related to uncertain tax positions as of
December 31, 2011 will significantly increase or decrease during the twelve-month period ending December 31,
2012; however, various events could cause our current expectations to change in the future. Should our position
with respect to the majority of these uncertain tax positions be upheld, the effect would be recorded in our
consolidated statements of operations as part of the income tax provision. Our policy is to recognize interest and
penalties accrued on uncertain tax positions as part of income tax expense.
Changes in our uncertain income tax positions, from January 1 through December 31 are presented below:
2011 2010
Balance, beginning of year .............................................. $ 942 $ —
Additions for tax positions from prior years ................................ 490 942
Interest ............................................................. 92 —
Balance, end of year ................................................... $1,524 $942
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