Airtran 2003 Annual Report Download - page 43

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12. INCOME TAXES
The components of our provision for income taxes are as follows (in thousands):
2003 2002 2001
Current provision (benefit):
Federal $ — $(786) $ 858
State 255 — 130
Total current provision (benefit) 255 (786) 988
Deferred provision:
Federal (12,853) — 1,896
State (755) — 356
Total deferred provision (13,608) — 2,252
Provision (benefit) for income taxes $(13,353) $(786) $3,240
A reconciliation of taxes computed at the statutory federal tax rate on income (loss) before income taxes to the provision (benefit) for
income taxes is as follows (in thousands):
2003 2002 2001
Tax computed at federal statutory rate $ 30,508 $ 3,761 $ 399
State income tax, net of federal tax benefit 2,672 329 303
Goodwill —— 481
Debt discount amortization 591 10 1,083
Utilization of preacquisition net operating loss carryforwards 2,252 — 2,252
Other 331 65 125
Valuation reserve, including the effect of changes to prior year deferred tax assets (49,707) (4,951) (1,403)
$(13,353) $ (786) $ 3,240
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for
financial reporting purposes and the amounts used for income tax purposes. Significant components of our deferred tax liabilities and
assets are as follows (in thousands):
As of December 31,
2003 2002
Deferred tax liabilities:
Depreciation $43,247 $ 25,663
Rent expense 13,217 5,944
Gross deferred tax liabilities 56,464 31,607
Deferred tax assets:
Deferred gains from sale and leaseback of aircraft 27,032 27,992
Accrued liabilities 6,636 6,264
Federal operating loss carryforwards 41,456 40,436
State operating loss carryforwards 4,292 4,406
AMT credit carryforwards 3,292 3,292
Other 3,763 5,265
Gross deferred tax assets 86,471 87,655
Valuation allowance (4,053) (56,048)
Net deferred tax assets 82,418 31,607
Total net deferred taxes $25,954 $ —
The Job Creation and Worker Assistance Act of 2002, passed by Congress in March 2002, resulted in a retroactive suspension of the
alternative minimum tax (AMT) net operating loss (NOL) 90 percent limitation. This legislation resulted in a tax benefit of $0.8 million
in 2002. In accordance with Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes,” the effect of
changes in tax laws or rates is included in income in the period that includes the enactment date, resulting in recognition of the change
in the first quarter of 2002.
At December 31, 2003, we had NOL carryforwards for income tax purposes of approximately $118.4 million that begin to expire in
2016. In addition, our AMT credit carryforwards for income tax purposes were $3.3 million. As a result of our two consecutive years
of profitable results in 2003 and 2002 and the expectation of continued profitability, we recorded a tax benefit of $15.9 million as a
result of the release of the valuation allowance on the deferred tax asset related to our NOL carryforwards. This adjustment also
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