Alaska Airlines and Horizon Air 2013 Annual Report Download - page 157

Deferred tax (assets) and liabilities comprise the
following at December 31 (in millions):
2013 2012
Excess of tax over book
depreciation ................ $ 919 $ 842
Other—net ................... 21 19
Gross deferred tax liabilities ...... 940 861
Mileage Plan .................. (185) (265)
AMT and other tax credits ........ —(1)
Inventory obsolescence ......... (18) (15)
Deferred gains ................ (12) (13)
Employee benefits ............. (85) (230)
Fuel hedge contracts ........... (14) (18)
Other—net ................... (30) (21)
Gross deferred tax assets ....... (344) (563)
Net deferred tax liabilities ....... 596 298
Current deferred tax asset ....... (113) (148)
Noncurrent deferred tax liability . . . 709 446
Net deferred tax liability ......... $ 596 $ 298
The Company has concluded that it is more likely
than not that its deferred tax assets will be
realizable and thus no valuation allowance has
been recorded as of December 31, 2013. This
conclusion is based on the expected future
reversals of existing taxable temporary differences,
anticipated future taxable income, and the
potential for future tax planning strategies to
generate taxable income, if needed. The Company
will continue to reassess the need for a valuation
allowance during each future reporting period.
Components of Income Tax Expense
The components of income tax expense were as
follows (in millions):
2013 2012 2011
Current tax expense
(benefit):
Federal ............ $145 83 $ —
State ............. 17 11 4
Total current ........... 162 94 4
Deferred tax expense:
Federal ............ 131 94 135
State ............. 15 10 10
Total deferred .......... 146 104 145
Total tax expense related
to income ............ $308 $198 $149
Income Tax Rate Reconciliation
Income tax expense reconciles to the amount
computed by applying the U.S. federal rate of
35% to income before income tax and accounting
change as follows (in millions):
2013 2012 2011
Income before income
tax................ $ 816 $ 514 $ 394
Expected tax expense . . 286 180 138
Nondeductible
expenses .......... 431
State income taxes .... 21 14 10
Other—net ........... (3) 1—
Actual tax expense ..... $ 308 $ 198 $ 149
Effective tax rate ...... 37.7% 38.5% 37.9%
Uncertain Tax Positions
The Company has identified its federal tax return
and its state tax returns in Alaska, Oregon, and
California as “major” tax jurisdictions. A
summary of the Company's jurisdictions and the
periods that are subject to examination are as
follows:
Jurisdiction Period
Federal ....................... 2010 to 2012
Alaska ....................... 2010 to 2012
California ..................... 2009 to 2012
Oregon ....................... 2002 to 2012
The 2002 to 2007 Oregon tax returns are
subject to examination only to the extent of net
operating loss carryforwards from those years
that were utilized in 2010 and later years.
At December 31, 2013, the total amount of
unrecognized tax benefits is recorded as a
liability, all of which would impact the effective
tax rate. Unrecognized tax benefits on uncertain
tax positions were not material as of
December 31, 2013, 2012 and 2011. No
interest or penalties related to these tax
positions were accrued as of December 31,
2013.
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ŠForm 10-K