Salesforce.com 2015 Annual Report Download - page 113

The excess tax benefits associated with stock option exercises are recorded directly to stockholders’ equity
only when such benefits are realized following the tax law ordering approach. As a result, the excess tax benefits
included in net operating loss carryforwards but are not reflected in deferred tax assets for fiscal 2015 and 2014
are $527.2 million and $408.8 million, respectively.
Tax Benefits Related to Stock-Based Expense
The total income tax benefit related to stock-based awards was $170.8 million, $147.8 million and $113.9
million for fiscal 2015, 2014 and 2013, respectively, the majority of which was not recognized as a result of the
valuation allowance.
Unrecognized Tax Benefits and Other Considerations
The Company records liabilities related to its uncertain tax positions. Tax positions for the Company and its
subsidiaries are subject to income tax audits by multiple tax jurisdictions throughout the world. Certain prior year
tax returns are currently being examined by various taxing authorities in countries including the United States,
Japan, Germany, Swtizerland and the United Kingdom. The Company recognizes the tax benefit of an uncertain
tax position only if it is more likely than not that the position is sustainable upon examination by the taxing
authority, based on the technical merits. The tax benefit recognized is measured as the largest amount of benefit
which is greater than 50 percent likely to be realized upon settlement with the taxing authority. The Company
had gross unrecognized tax benefits of $146.2 million, $102.3 million and $75.1 million as of January 31, 2015,
2014 and 2013 respectively.
A reconciliation of the beginning and ending balance of total unrecognized tax benefits for fiscal years
2015, 2014 and 2013 is as follows (in thousands):
Fiscal Year Ended January 31,
2015 2014 2013
Balance as of February 1, ................................ $102,275 $ 75,144 $51,971
Tax positions taken in prior period:
Gross increases .................................... 17,938 8,420 7,304
Gross decreases ................................... (1,967) (4,466) (4,460)
Tax positions taken in current period:
Gross increases .................................... 34,226 27,952 24,401
Settlements ........................................... 0 0 (121)
Lapse of statute of limitations ............................ (1,224) (5,205) (4,159)
Currency translation effect ............................... (5,060) 430 208
Balance as of January 31, ................................ $146,188 $102,275 $75,144
For fiscal 2015, 2014 and 2013 total unrecognized tax benefits in an amount of $44.6 million, $34.9 million
and $32.3 million respectively, if recognized, would reduce income tax expense and the Company’s effective tax
rate after considering the impact of the change in valuation allowance in the U.S.
The Company recognizes accrued interest and penalties related to unrecognized tax benefits in the income
tax provision. The Company accrued penalties and interest in the amount of $1.3 million, $0.6 million and $0.3
million in income tax expense during fiscal 2015, 2014 and 2013, respectively. The balance in the non-current
income tax payable related to penalties and interest was $4.6 million, $3.3 million and $1.7 million as of
January 31, 2015, 2014 and 2013, respectively.
The Company has operations and taxable presence in multiple jurisdictions in the U.S. and outside of the
U.S. Tax positions for the Company and its subsidiaries are subject to income tax audits by multiple tax
jurisdictions around the world. The Company currently considers U.S. federal and state, Canada, Japan,
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