Clearwire 2007 Annual Report Download - page 92

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to certain intangible assets, including certain spectrum assets, which are not amortized for book purposes. The net
change in the valuation allowance for the years ended December 31, 2007, 2006 and 2005 was an increase of
$270.6 million, $103.7 million, and $48.4 million, respectively. Net noncurrent deferred tax liabilities of
$43.1 million are included in other long-term liabilities as of December 31, 2007.
The Company incurs significant deferred tax liabilities related to the spectrum licenses. Since there is no
amortization on certain acquired spectrum licenses for book purposes and the Company cannot estimate the
amount, if any, of deferred tax liabilities related to those acquired spectrum licenses which will reverse in future
periods, the valuation allowance has been increased accordingly. The Company continues to amortize acquired
spectrum licenses for federal income tax purposes. The ongoing difference between book and tax amortization
resulted in an additional deferred income tax provision of approximately $5.4 million for the year ended
December 31, 2007.
The income tax provision consists of the following for the year ended December 31, 2007, 2006 and 2005 (in
thousands):
2007 2006 2005
Year Ended December 31,
Current taxes:
International ............................................ $ 107 $ 21 $ —
Federal ................................................ — — —
State .................................................. 101 — —
Total current taxes ...................................... 208 21 —
Deferred taxes:
International ............................................ (121) — —
Federal ................................................ 4,985 2,582 1,389
State .................................................. 355 378 70
Total deferred taxes ..................................... 5,219 2,960 1,459
Income tax provision .................................... $5,427 $2,981 $1,459
The income tax rate computed using the federal statutory rates is reconciled to the reported effective income
tax rate as follows:
2007 2006 2005
Year Ended December 31,
Federal statutory income tax rate ................................ 35.0% 35.0% 35.0%
State income taxes (net of federal benefit) .......................... 2.4 3.0 0.3
Other, net.................................................. (1.2) (2.6) (2.6)
Valuation allowance .......................................... (36.9) (36.4) (33.8)
Effective income tax rate ...................................... (0.7)% (1.0)% (1.1)%
The Company adopted the provisions of FASB Interpretation Number 48 (“FIN 48”) on January 1, 2007.
FIN 48 clarifies the accounting for income taxes by prescribing a recognition threshold that a tax position is required
to meet before being recognized in the financial statements. FIN 48 also provides guidance or derecognition,
measurement, classification, interest and penalties, accounting in interim periods, disclosure and transition.
As of January 1, 2007, the Company had no unrecognized tax benefits and there was no effect on its financial
condition or results of operations as a result of implementing FIN 48. There have been no changes to the Company’s
liability for unrecognized tax benefits during the year ended December 31, 2007.
84
CLEARWIRE CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)