Autodesk 2016 Annual Report Download - page 164

2016 Form 10-K 92
deferred taxes. Autodesk recorded a $230.8 million valuation allowance against the Company's U.S. federal and remaining state
deferred tax assets recorded in the second quarter of fiscal 2016. Autodesk regularly assesses the need for a valuation allowance
against its deferred tax assets. In making that assessment, Autodesk considers both positive and negative evidence, whether it is
more likely than not that some or all of the deferred tax assets will not be realized. In evaluating the need for a valuation
allowance, Autodesk considered recent cumulative losses in the United States arising from the Company's business model
transition as a significant piece of negative evidence and determined that it was not more likely than not that the federal and
remaining state deferred tax assets would be realized. As Autodesk continually strives to optimize our overall business model,
tax planning strategies may become feasible and prudent allowing us to realize many of the deferred tax assets which are offset
by a valuation allowance; therefore, Autodesk will continue to evaluate the realizability of our net deferred tax assets each
quarter, both in the US and in foreign jurisdictions, based on all available evidence, both positive and negative.
Autodesk provides U.S. income taxes on the earnings of foreign subsidiaries, except to the extent subsidiaries' earnings
are considered permanently reinvested outside the U.S. As of January 31, 2016, the cumulative amount of earnings upon which
U.S. income taxes have not been provided was $1,942.2 million. The unrecognized deferred tax liability for these earnings was
approximately $544.3 million.
Realization of foreign non-current net deferred tax assets of $9.2 million is dependent upon the company's ability to
generate future taxable income in appropriate tax jurisdictions to obtain benefit from the reversal of temporary differences, net
operating loss carryforwards and tax credits. The amount of deferred tax assets considered realizable is subject to adjustment in
future periods if estimates of future taxable income are reduced and Autodesk then determines that it is not more likely than not
to realize such deferred tax assets.
As of January 31, 2016, Autodesk had $222.7 million of cumulative federal tax loss carryforwards and $258.9 million of
cumulative state tax loss carryforwards, which may be available to reduce future income tax liabilities in certain jurisdictions.
These federal and state tax loss carryforwards will expire beginning fiscal 2019 through fiscal 2037 and fiscal 2019 through
fiscal 2037, respectively. Autodesk also had $6.0 million of cumulative UK tax loss carryforwards, which may be available to
reduce future income tax liabilities indefinitely. Autodesk had $6.8 million of cumulative federal and state capital loss
carryforwards as of January 31, 2016 which are available to offset future capital gains through fiscal 2019.
As of January 31, 2016, Autodesk had $116.2 million of cumulative federal research tax credit carryforwards, $60.9
million of cumulative California state research tax credit carryforwards, and $50.4 million of cumulative Canadian federal tax
credit carryforwards, which may be available to reduce future income tax liabilities in the respective jurisdictions. The federal
tax credit carryforwards will expire beginning fiscal 2021 through fiscal 2037, the state credit carryforwards may reduce future
California income tax liabilities indefinitely, and the Canadian tax credit carryforwards will expire beginning fiscal 2027
through fiscal 2037. Autodesk also has $185.4 million of cumulative foreign tax credit carryforwards, which may be available
to reduce future U. S. tax liabilities. The foreign tax credit will expire beginning fiscal 2019 through fiscal 2027.
Utilization of net operating losses and tax credits may be subject to an annual limitation due to ownership change
limitations provided in the Internal Revenue Code and similar state provisions. This annual limitation may result in the
expiration of net operating losses and credits before utilization.
As a result of certain business and employment actions and capital investments undertaken by Autodesk, income earned
in certain Europe and Asia Pacific countries is subject to reduced tax rates through fiscal 2016 and 2020, respectively with
extensions available with incremental business and employment actions. We have no net income tax benefits attributable to the
tax status of these business arrangements in fiscal 2016, compared to $1.2 million ($0.01 basic net income per share) in fiscal
2015, and $9.7 million ($0.04 basic net income per share) in fiscal 2014. The income tax benefits were offset by accruals of
U.S. income taxes on undistributed earnings, among other factors.
As of January 31, 2016, the company had $254.3 million of gross unrecognized tax benefits, of which $236.8 million
would impact the effective tax rate, if recognized. However, this rate impact would be offset to the extent that recognition of
unrecognized tax benefits currently presented as a reduction of deferred tax assets would increase the valuation allowance.
It is possible that the amount of unrecognized tax benefits will change in the next twelve months; however an estimate of
the range of the possible change cannot be made at this time.
2016 Annual Report