Seagate 2009 Annual Report Download - page 98

Table of Contents
SEAGATE TECHNOLOGY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
with revisions by the Company to forecasts of U.S. taxable income and a decrease associated with the utilization of tax net operating loss carry
forwards in fiscal year 2010. At July 3, 2009, the deferred tax asset valuation allowance was approximately $1.3 billion reflecting an increase of
approximately $864 million in fiscal year 2009. The increase in valuation allowance resulted primarily from the liquidation of the Company's
wholly owned subsidiary, Maxtor, effective June 1, 2009 and represented the net effects of the extinguishment of all deferred tax assets related to
historical carryover tax attributes of Maxtor and the increase in deferred tax assets related to tax net operating losses incurred in connection with
the liquidation transaction. The net increase in the valuation allowance in fiscal year 2008 was $34 million.
At July 2, 2010, the Company had $505 million of net deferred tax assets. The realization of $473 million of these deferred tax assets is
primarily dependent on the Company's ability to generate sufficient U.S. and certain non-U.S. taxable income in future periods. Although
realization is not assured, the Company's management believes that it is more likely than not that these deferred tax assets will be realized. The
amount of deferred tax assets considered realizable, however, may increase or decrease in subsequent periods when the Company reevaluates the
underlying basis for its estimates of future U.S. and certain non-U.S. taxable income.
At July 2, 2010, the Company had U.S. federal, state and non-U.S. tax net operating loss carryforwards of approximately $2.7 billion,
$1.9 billion and $589 million, respectively, which will expire at various dates beginning in fiscal year 2011, if not utilized. At July 2, 2010, the
Company had U.S. federal and state tax credit carryforwards of $256 million and $69 million, respectively, which will expire at various dates
beginning in fiscal year 2011, if not utilized. Certain of these tax net operating losses and tax credit carryforwards have not been audited by the
relevant tax authorities and could be subject to adjustment on examination. Of the $2.7 billion of loss carryovers noted above, approximately
$753 million will be credited to Additional paid-in capital upon recognition.
Approximately $461 million and $93 million of the Company's U.S. NOL and tax credit carryforwards, respectively, are subject to an
annual limitation of $44.8 million pursuant to U.S. tax law.
During the fiscal year ended July 2, 2010, an enacted legislative change in U.S. tax law was taken into account in computing the Company's
income tax provision. The Worker, Homeownership, and Business Assistance Act of 2009 was enacted on November 6, 2009. This law allowed
the Company to elect an increased carryback period for net operating losses incurred in 2008 or 2009 from two years to three, four, or five years
at the Company's option. The Company recorded an $11 million income tax benefit as result of the increased carryback period.
In connection with the Company's previously announced plans to move its corporate headquarters to Ireland, the Company initiated certain
pre-reorganization steps which resulted in its existing Cayman parent holding company becoming an Irish tax resident in fiscal year 2010. As a
result of the Company becoming an Irish tax resident in fiscal year 2010, the Irish statutory rate of 25% is used in fiscal year 2010
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