iHeartMedia 2009 Annual Report Download - page 127

For the year ended December 31, 2009, the Company recorded certain impairment charges that are not deductible for tax purposes
and resulted in a reduction of deferred tax liabilities of approximately $379.6 million. Additional decreases in net deferred tax
liabilities are as a result of increases in deferred tax assets associated with current period net operating losses. The Company is able to
utilize those losses through either carrybacks to prior years as a result of the November 6, 2009, tax law change and expanded loss
carryback provisions provided by the Worker, Homeownership, and Business Assistance Act of 2009 (the “Act”) or based on our
expectations as to future taxable income from deferred tax liabilities that reverse in the relevant carryforward period for those net
operating losses that cannot be carried back. Increases in 2009 deferred tax liabilities of approximately $338.9 million are as a result
of the deferral of certain discharge of indebtedness income, for income tax purposes, resulting from the reacquisition of business
indebtedness (see Note G). These gains are allowed to be deferred for tax purposes and recognized in future periods beginning in
2014 through 2019, as provided by the American Recovery and Reinvestment Act of 2009 signed into law on February 17, 2009.
At December 31, 2009, net deferred tax liabilities include a deferred tax asset of $23.2 million relating to stock-based compensation
expense under ASC 718-10, Compensation—Stock Compensation. Full realization of this deferred tax asset requires stock options to
be exercised at a price equaling or exceeding the sum of the grant price plus the fair value of the option at the grant date and restricted
stock to vest at a price equaling or exceeding the fair market value at the grant date. Accordingly, there can be no assurance that the
stock price of the Company’s common stock will rise to levels sufficient to realize the entire tax benefit currently reflected in its
balance sheet.
For the year ended December 31, 2008, the Company recorded approximately $2.5 billion in additional deferred tax liabilities
associated with the applied purchase accounting adjustments resulting from the acquisition of Clear Channel. The additional deferred
tax liabilities primarily relate to differences between the purchase accounting adjusted book basis and the historical tax basis of the
Company’s intangible assets. During the post-merger period ended December 31, 2008, the Company recorded an impairment charge
to its FCC licenses, permits and tax deductible goodwill resulting in a decrease of approximately $648.2 million in recorded deferred
tax liabilities.
The deferred tax liability related to intangibles and fixed assets primarily relates to the difference in book and tax basis of acquired
FCC licenses, permits and tax deductible goodwill created from the Company’s various stock acquisitions. In accordance with ASC
350-10, Intangibles—Goodwill and Other, the Company no longer amortizes FCC licenses and permits. As a result, this deferred tax
liability will not reverse over time unless the Company recognizes future impairment charges related to its FCC licenses, permits and
tax deductible goodwill or sells its FCC licenses or permits. As the Company continues to amortize its tax basis in its FCC licenses,
permits and tax deductible goodwill, the deferred tax liability will increase over time.
The reconciliation of income tax computed at the U.S. Federal statutory tax rates to income tax expense (benefit) is:
122
(In thousands)
Post-merger year
ended December 31,
2009
Post-merger period
ended December 31,
2008
Pre-merger period
ended July 30,
2008
Pre-merger year
ended December 31,
2007
Amoun
t
Percen
t
Amoun
t
Percen
t
Amoun
t
Percen
t
Amoun
t
Percen
t
Income tax expense (benefit) at
statutory rates
$(1,589,825) 35% $(2,008,040) 35% $205,108 35% $448,298 35%
State income taxes, net of Federal
tax benefit
(7,660) 0% (38,359) 1% 21,760 4% 35,548 3%
Foreign taxes 92,648 (2%) 95,478 (2%) (29,606) (5%) (8,857) (1%)
Nondeductible items
3,317 (0%) 1,591 (0%) 2,464 0% 6,228 0%
Changes in valuation allowance
and other estimates
(54,579) 1% 53,877 (1%) (32,256) (6%) (34,005) (3%)
Impairment charge
1,050,535 (23%) 1,194,182 (21%)
—
—
—
—
Other, ne
t
12,244 (0%) 4,648 (0%) 5,113 1% (6,064) (0%)
$ (493,320) 11% $ (696,623) 12% $172,583 29% $441,148 34%