Zynga 2012 Annual Report Download - page 96
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7. Income Taxes
Income (loss) before income tax expense consists of the following for the periods shown below (in
thousands):
Year Ended December 31,
2012 2011 2010
United States ............................... $ (41,963) $(379,800) $141,401
International ................................ (117,612) (26,342) (14,342)
Total $(159,575) $(406,142) $127,059
Income tax expense (benefit) consists of the following for the periods shown below (in thousands):
Year Ended December 31,
2012 2011 2010
Current:
Federal .................................... $84,421 $(8,988) $34,092
State ...................................... 5,431 1,195 10,537
Foreign .................................... 3,862 1,600 304
Total current tax expense .......................... 93,714 (6,193) 44,933
Deferred:
Federal .................................... (40,331) 4,687 (9,264)
State ...................................... (2,821) 441 2,209
Foreign .................................... (689) (761) (1,414)
Total deferred tax expense/(benefit) ................. (43,841) 4,367 (8,469)
Provision for / (benefit from) income taxes ........... $49,873 $(1,826) $36,464
The reconciliation of federal statutory income tax provision (benefit) to our effective income tax provision
is as follows (in thousands):
Year Ended December 31,
2012 2011 2010
Expected provision / (benefit) at U.S. federal statutory rate ............... $(55,837) $(142,166) $ 44,452
State income taxes—net of federal benefit ............................ (370) (6,340) 7,841
Income taxed at foreign rates ....................................... 48,427 6,338 3,894
Stock-based compensation ......................................... 29,998 43,064 5,447
Tax credits ..................................................... (8,026) (34,769) (14,231)
Tax reserve for uncertain tax positions ............................... 48,252 29,303 12,846
Change in valuation allowance ..................................... (8,005) 101,489 (28,647)
Impact of change in tax rates ....................................... (566) (205) 5,211
Acquisition costs ................................................ (4,960) 397 700
Other .......................................................... 960 1,063 (1,049)
$ 49,873 $ (1,826) $ 36,464
Before we began forming non-U.S. operating companies during 2010, the revenue from non-U.S. users was
earned by our U.S. Company, resulting in virtually no foreign profit before tax. The new foreign entities, as start-
up companies, generated operating losses in 2010 and 2011. During 2012, we completed the implementation of
our international structure, which resulted in a significant loss outside of the U.S. During 2010, 2011, and 2012,
the net tax impact of the losses generated in tax jurisdictions with lower statutory rates than the U.S. rate
increased tax expense and the effective tax rate.
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