Expedia 2009 Annual Report Download - page 100

Expedia, Inc.
Notes to Consolidated Financial Statements — (Continued)
At December 31, 2009, we had federal, state and foreign net operating loss carryforwards (“NOLs”) of
approximately $8 million, $23 million and $88 million. If not utilized, the federal and state NOLs will expire at
various times between 2010 and 2029, $81 million foreign NOLs can be carried forward indefinitely, and
$7 million foreign NOLs will expire at various times between 2010 and 2029.
At December 31, 2009, we had a valuation allowance of approximately $46 million related to the portion of
net operating loss carryforwards and other items for which it is more likely than not that the tax benefit will not
be realized. This amount represented an increase of approximately $14 million over the amount recorded as of
December 31, 2008 and was primarily attributable to an increase in foreign operating losses.
We have not provided deferred U.S. income taxes on undistributed earnings of certain foreign subsidiaries
that we intend to reinvest permanently outside of the United States; the total amount of such earnings as of
December 31, 2009 was $72 million. Should we distribute earnings of foreign subsidiaries in the form of
dividends or otherwise, we may be subject to U.S. income taxes. Due to complexities in tax laws and various
assumptions that would have to be made, it is not practicable to estimate the amount of unrecognized deferred
U.S. taxes on these earnings.
A reconciliation of total income tax expense to the amounts computed by applying the statutory federal
income tax rate to income before income taxes is as follows:
Year Ended December 31,
2009 2008 2007
(In thousands)
Income tax (benefit) expense at the federal statutory rate of
35% ............................................. $160,308 $(880,146) $173,944
Non-deductible goodwill impairment ..................... — 855,550 —
Worthless stock deduction ............................. (23,124) — —
State income taxes, net of effect of federal tax benefit ........ 7,089 11,317 9,844
Unrecognized tax benefits and related interest .............. 3,923 12,525 4,211
Other, net ........................................... 6,204 6,720 15,115
Income tax expense ................................... $154,400 $ 5,966 $203,114
During 2009, we recorded a tax benefit of $23 million related to a worthless stock deduction associated with
the closure of a foreign subsidiary.
By virtue of the previously filed separate company and consolidated income tax returns filed with IAC, we
are routinely under audit by federal, state, local and foreign authorities. These audits include questioning the
timing and the amount of income and deductions and the allocation of income among various tax jurisdictions.
Annual tax provisions include amounts considered sufficient to pay assessments that may result from the
examination of prior year returns. We are no longer subject to tax examinations by tax authorities for years prior
to 1998.
F-28