eBay 2008 Annual Report Download - page 116

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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 2006, 2007, and 2008 to income before income
taxes (in thousands):
2006 2007 2008
Year Ended December 31,
Provision at statutory rate ........................... $541,471 $ 262,798 $ 764,248
Permanent differences:
Foreign income taxed at different rates ............... (230,350) (404,007) (519,203)
Goodwill impairment ............................ — 486,828 —
Change in valuation allowance ..................... 35,652 34,983 48,614
Stock-based compensation ......................... 26,179 24,516 26,730
State taxes, net of federal benefit .................... 58,542 15,672 54,356
Tax credits .................................... (1,142) (7,766) (9,251)
Other........................................ (8,934) (10,424) 38,596
$ 421,418 $ 402,600 $ 404,090
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):
2007 2008
December 31,
Deferred tax assets:
Net operating loss and credits ................................ $159,333 $ 311,807
Accruals and allowances . ................................... 174,552 242,763
Stock-based compensation ................................... 158,767 212,147
Net unrealized (gains) losses ................................. 4,145 4,052
Net deferred tax assets . . ................................... 496,797 770,769
Valuation allowance ....................................... (119,153) (167,767)
377,644 603,002
Deferred tax liabilities:
Acquisition-related intangibles ................................ (152,068) (165,793)
Depreciation and amortization ................................ (36,462) (73,477)
Available-for-sale securities .................................. (235,894) (48,812)
Foreign statutory reserves ................................... (12,386) (19,498)
(436,810) (307,580)
$ (59,166) $ 295,422
As of December 31, 2008 our federal, foreign and state net operating loss carryforwards, or NOLs, for income
tax purposes were approximately $263.9 million, $755.5 million, and $41.7 million, respectively. Of the
$263.9 million of federal net operating loss carryforwards, approximately $227.5 million relate to acquisitions
that occurred during the year. The federal and state net operating loss carryforwards are subject to various
limitations under Section 382 of the Internal Revenue Code. If not utilized, the federal net operating loss
108
eBay Inc.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)