SanDisk 2008 Annual Report Download - page 100

Notes To Consolidated Financial Statements
The Company has incurred a cumulative loss in recent years and determined in fiscal year 2008, based on all
available evidence, that there was substantial uncertainty as to the realizability of the deferred tax assets in future
periods. A valuation allowance of $529.4 million and $67.4 million was provided on gross deferred tax assets at
December 28, 2008 and December 30, 2007, respectively, based upon available evidence that it is not more likely
than not that certain deferred tax assets will be realized. The valuation allowance increased $462.0 million in
fiscal year 2008 from fiscal year 2007, due to the establishment of the valuation allowance on certain U.S.
deferred tax assets, including tax credits, net operating losses and book/tax timing differences and certain foreign
deferred tax assets. The future release of the valuation allowance will benefit the provision for income taxes. The
fiscal year 2008 taxable loss in the U.S. can be carried back to prior years and a tax refund receivable of
$241.7 million has been recorded due to federal and certain state net operating loss carryback claims.
The Emergency Economic Stabilization Act of 2008 enacted October 3, 2008 retroactively extended the
research credit carryforward for the fiscal year 2008. As a result, the generated credit of $2.7 million will be
carried forward and is subject to a valuation allowance.
The Company has federal, state before federal benefit, and foreign net operating loss carryforwards of
approximately $87.6 million, $104.5 million and $175.0 million, respectively. Some net operating losses will
begin to expire in fiscal year 2011, if not utilized. The Company also has federal and state research credit
carryforwards of approximately $12.2 million and $18.0 million before federal benefit, respectively. In addition,
the Company has foreign tax credits of $124.7 million and alternative minimum tax credits of $1.1 million. Some
credit carryforwards will begin to expire in fiscal year 2013, if not utilized. Some of these carryforwards are
subject to annual limitations, including Section 382 of the Internal Revenue Code of 1986, as amended, for U.S.
tax purposes and similar state provisions.
No provision has been made for U.S. income taxes or foreign withholding taxes on approximately
$94.8 million of cumulative unremitted earnings of certain foreign subsidiaries as of December 28, 2008, since
the Company intends to indefinitely reinvest these earnings outside the U.S. If these earnings were distributed to
the U.S., the Company would be subject to additional U.S. income taxes and foreign withholding taxes (subject
to adjustment for foreign tax credits). As of December 28, 2008, the unrecognized deferred tax liability for these
earnings was approximately $26.8 million.
The tax benefit (charge) associated with the exercise of stock options was applied to capital in excess of par
value in the amount of ($3.9) million, $18.4 million and $61.5 million in fiscal years 2008, 2007 and 2006,
respectively. The tax benefit associated with the exercise of stock options credited to goodwill in fiscal years
2008, 2007 and 2006 was zero, $0.6 million and $4.6 million, respectively.
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