eTrade 2010 Annual Report Download - page 154

The principal components of the deferred tax assets for which a valuation allowance has been established
include the following state and foreign country net operating loss carryforwards and charitable contributions
which have a limited carryforward period:
• At December 31, 2010, the Company had certain foreign country net operating loss carryforwards of
approximately $109 million and other foreign country temporary differences for which a deferred tax
asset of approximately $34.8 million was established. The foreign net operating losses represent the
foreign tax loss carryforwards in numerous foreign countries, the vast majority of which are not subject
to expiration. In most of these foreign countries, the Company has historical tax losses, accordingly,
the Company has provided a valuation allowance of $34.8 million against such deferred tax asset at
December 31, 2010.
• At December 31, 2010, the Company had gross state net operating loss carryforwards of $2.6 billion
that expire between 2011 and 2030, most of which are subject to reduction for apportionment when
utilized. A deferred tax asset of approximately $108.9 million has been established related to these
state net operating loss carryforwards with a valuation allowance of $34.0 million against such deferred
tax asset at December 31, 2010.
• At December 31, 2010, the Company had charitable contribution carryforwards of $18.9 million that
expire between 2012 and 2015. A deferred tax asset of approximately $7.2 million was established with
a corresponding $7.2 million valuation allowance as it is more likely than not that these contributions
will expire unused.
Effective Tax Rate
The effective tax rate differed from the federal statutory rate as follows:
Year Ended December 31,
2010 2009 2008
Federal statutory rate (35.0)% (35.0)% (35.0)%
State income taxes, net of federal tax benefit(1) 81.0 (2.6) (3.5)
Difference between statutory rate and foreign effective tax rate and
establishment of valuation allowance for foreign deferred tax assets 47.3 0.1 0.5
Tax exempt income (19.9) (0.1) (0.8)
Disallowed interest expense 387.3 4.1 1.9
Disallowed Debt Exchange loss — 4.7 —
Change in valuation allowance(1) 236.5 (0.7) 2.4
Other 109.1 0.2 (2.2)
Effective tax rate 806.3% (29.3)% (36.7)%
(1) For the year ended December 31, 2010, the impact of the reclassification of the valuation allowance to unrecognized tax benefit was
excluded from the effective tax rate reconciliation as there was no net impact to the effective tax rate.
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