eTrade 2007 Annual Report Download - page 128
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It is likely that certain examinations may be settled or the statute of limitations could expire with regards to
other tax filings, in the next twelve months. In addition, proposed legislation could favorably impact certain of
the Company’s unrecognized tax benefits. Such events would generally reduce the Company’s unrecognized tax
benefits, either because the tax positions are sustained or because the Company agrees to the disallowance, by as
much as $30.4 million, of which $28.8 million could affect the Company’s total tax provision or the effective tax
rate.
The Company’s continuing practice is to recognize interest and penalties, if any, related to income tax
matters in income tax expense. After the adoption of FIN 48, the Company has total gross reserves for interest
and penalties of $15.1 million and $8.6 million as of January 1, 2007 and December 31, 2007, respectively. The
tax benefit for the year ended December 31, 2007 includes a reduction in the accrual for interest of $6.5 million,
principally related to the reduction for reserves due to the filing of tax accounting method change requests with
the IRS.
The components of income tax expense (benefit) from continuing operations are as follows (dollars in
thousands)
Year Ended December 31,
2007 2006 2005
Current:
Federal $(315,229) $211,984 $158,050
Foreign 12,589 (56) 3,518
State 7,904 8,394 19,237
Tax benefit recognized for FIN 48 uncertainties in the
statement of income (loss) (3,327) — —
Total current (298,063) 220,322 180,805
Deferred:
Federal (434,626) 82,433 45,200
Foreign 2,867 (5,996) (1,264)
State (6,128) 5,224 5,082
Total deferred (437,887) 81,661 49,018
Income tax expense (benefit) from continuing operations $(735,950) $301,983 $229,823
The components of income (loss) before income taxes, minority interest, discontinued operations and
cumulative effect of accounting change are as follows (dollars in thousands):
Years Ended December 31,
2007 2006 2005
Domestic $(2,213,880) $893,382 $653,131
Foreign 36,176 35,415 22,995
Total income (loss) before income taxes, minority
interest, discontinued operations and cumulative
effect of accounting change $(2,177,704) $928,797 $676,126
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