eBay 2006 Annual Report Download - page 109

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The following is a reconciliation of the difference between the actual provision for income taxes and the
provision computed by applying the federal statutory rate of 35% for 2004, 2005, and 2006 to income before income
taxes (in thousands):
2004 2005 2006
Year Ended December 31,
Provision at statutory rate ........................... $394,881 $ 542,282 $ 541,471
Permanent differences:
Foreign income taxed at different rates ................ (82,267) (149,463) (230,350)
Change in valuation allowance ...................... 2,000 12,587 35,652
Stock-based compensation ......................... 26,179
State taxes, net of federal benefit .................... 35,008 53,697 58,542
Tax credits ..................................... (6,975) (9,136) (1,142)
Other . . ....................................... 1,238 17,318 (8,934)
$343,885 $ 467,285 $ 421,418
Deferred tax assets and liabilities are recognized for the future tax consequences of 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 reverse. Significant deferred tax assets and liabilities consist of the
following (in thousands):
2005 2006
December 31,
Deferred tax assets:
Net operating loss and credits ................................ $132,832 $ 111,133
Accruals, allowances and stock-based compensation ................ 71,504 192,276
Net unrealized (gains) losses ................................. 9,616 4,024
Net deferred tax assets . . ................................... 213,952 307,433
Valuation allowance ....................................... (77,712) (69,777)
136,240 237,656
Deferred tax liabilities:
Acquisition-related intangibles ................................ (212,702) (171,422)
Depreciation and amortization ................................ (79,946) (30,139)
(292,648) (201,561)
$(156,408) $ 36,095
As of December 31, 2006, our federal, foreign and state net operating loss carryforwards, or NOLs, for income
tax purposes were approximately $44.9 million, $324.6 million, and $54.4 million, respectively. The utilization of a
portion of the NOLs is subject to an annual limitation under Section 382 of the Internal Revenue Code due to a
change of ownership. However, we do not believe such annual limitation will impact our realization of the NOLs. If
not utilized, the federal net operating loss carryforwards will begin to expire in 2019, the state net operating loss
carryforwards will begin to expire in 2009, and the foreign net operating loss carryforwards will begin to expire in
2009. As of December 31, 2006, our state tax credit carryforwards for income tax purposes were approximately
$7.9 million. If not utilized, the state tax credit carryforwards will begin to expire in 2015.
105
eBay Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)