JetBlue Airlines 2015 Annual Report Download - page 60

JETBLUE AIRWAYS CORPORATION-2015Annual Report56
PART II
ITEM 8Financial Statements and Supplementary Data
The effective tax rate on income before income taxes differed from the federal income tax statutory rate for the years ended December 31 for the
following reasons (in millions):
2015 2014 2013
Income tax expense at statutory rate $ 384 $ 218 $ 98
Increase resulting from:
State income tax, net of federal benefit 28 18 9
Valuation Allowance, federal and state — (19) —
Other, net 8 5 4
TOTAL INCOME TAX EXPENSE $ 420 $ 222 $ 111
Cash payments for income taxes were $42 million in 2015, $8 million in 2014 and $4 million in 2013. The net deferred taxes below include a current net
deferred tax asset of $145 million and a long-term net deferred tax liability of $1.2 billion at December 31, 2015, and a current net deferred tax asset
of $174 million and a long-term net deferred tax liability of $832 million at December 31, 2014.
The components of our deferred tax assets and liabilities as of December 31 are as follows (in millions):
2015 2014
Deferred tax assets:
Net operating loss carryforwards $ 15 $ 152
Employee benefits 39 41
Deferred revenue/gains 104 102
Rent expense 33 30
Terminal 5 lease 36 32
Other 32 27
Financial derivative instruments 2 40
Deferred tax assets, net 261 424
Deferred tax liabilities:
Accelerated depreciation (1,334) (1,082)
Deferred tax liabilities, net (1,334) (1,082)
NET DEFERRED TAX LIABILITY $ (1,073) $ (658)
We have a U.S. Federal regular net operating loss (“NOL”) carryforward
of $65 million which begins to expire in 2033. This NOL includes an
unrecorded tax benefit of approximately $9 million related to stock-based
compensation that will be recorded in equity when, and to the extent,
realized. Section 382 of the Internal Revenue Code imposes limitations
on a corporation’s ability to use its NOL carryforwards if it experiences an
“ownership change.” As of December 31, 2015, our NOLs are not subject
to such limitation; however, if an ownership change were to occur in the
future, the ability to use our NOLs could be limited.
In evaluating the realizability of the deferred tax assets, we assess whether
it is more likely than not that some portion, or all, of the deferred tax
assets, will be realized. We consider, among other things, the generation
of future taxable income (including reversals of deferred tax liabilities)
during the periods in which the related temporary differences will become
deductible. We have concluded that no valuation allowance is required
as of December 31, 2015.
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follow (in millions):
2015 2014 2013
Unrecognized tax benefits at January 1, $ 16 $ 11 $ 13
Increases for tax positions taken during a prior period — 2 —
Increases for tax positions taken during the period 6 4 2
Decreases for tax positions taken during a prior period (1) (1) —
Decreases for settlement with tax authorities during the period — — (4)
UNRECOGNIZED TAX BENEFITS DECEMBER 31, $ 21 $ 16 $ 11
Interest and penalties accrued on unrecognized tax benefits were not significant. If recognized, $15 million of the unrecognized tax benefits as of
December 31, 2015 would impact our effective tax rate. We do not expect any significant change in the amount of the unrecognized tax benefits
within the next twelve months. As a result of NOLs and statute of limitations in our major tax jurisdictions, years 2003 through 2014 remain subject to
examination by the relevant tax authorities.
NOTE 9 Employee Retirement Plan
We sponsor a retirement savings 401(k) defined contribution plan, or
the Plan, covering all of our Crewmembers where we match 100% of
our Crewmember contributions up to 5% of their eligible wages. The
contributions vest over five years and are measured from a Crewmember’s
hire date. Participants are immediately vested in their voluntary contributions.
Another component of the Plan is a Company discretionary contribution
of 5% of eligible non-management Crewmember compensation, which
we refer to as Retirement Plus. Retirement Plus contributions vest over
three years and are measured from a Crewmember’s hire date. Our non-
management Crewmembers are also eligible to receive profit sharing,