ServiceMagic 2010 Annual Report Download - page 77

Table of Contents
IAC/INTERACTIVECORP AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
NOTE 4—INCOME TAXES (Continued)
federal capital losses will expire in 2015, and the state capital losses will expire between 2013 and 2015. Utilization of capital losses will be
limited to the Company's ability to generate future capital gains.
At December 31, 2010, the Company had tax credit carryforwards of $14.2 million. Of this amount, $8.1 million related to federal credits
for foreign taxes, $5.3 million related to state tax credits for research activities, and $0.8 million related to various state and local tax credits. Of
these credit carryforwards, $6.1 million can be carried forward indefinitely and $8.1 million will expire within ten years.
During 2010, the Company's valuation allowance increased by $4.9 million. The valuation allowance increase primarily relates to net
unbenefited unrealized losses on equity investments and foreign NOLs, partially offset by a write-off of previously unbenefited deferred tax
assets for state capital loss carryforwards. At December 31, 2010, the Company had a valuation allowance of $40.3 million related to the portion
of tax loss carryforwards and other items for which it is more likely than not that the tax benefit will not be realized.
A reconciliation of the income tax provision (benefit) to the amounts computed by applying the statutory federal income tax rate to earnings
(loss) from continuing operations before income taxes is shown as follows (in thousands):
72
Years Ended December 31,
2010 2009 2008
Income tax provision (benefit) at the federal statutory rate of
35%
$
7,940
$
(331,450
)
$
38,934
Change in tax reserves, net of effect of federal, state and
foreign tax benefits
8,696
14,558
12,500
Foreign tax credits
(5,255
)
(5,200
)
(11,608
)
Foreign income taxed at a different statutory tax rate
(4,957
)
(182
)
(6,398
)
State income taxes, net of effect of federal tax benefit
4,794
1,129
(13,015
)
Change in federal valuation allowance on investments in
unconsolidated affiliates
3,627
1,446
9,522
Non
-
deductible expenses
3,069
2,576
3,441
Federal tax credits for research activities
(956
)
(933
)
(1,039
)
Effect of change in estimated state tax rate
516
787
(39,456
)
Tax exempt income
(481
)
(1,148
)
(2,400
)
Net adjustment related to the reconciliation of income tax
provision (benefit) accruals to tax returns, net of effect of
federal tax benefit
(38
)
(370
)
(2,049
)
Non
-
deductible impairments of goodwill and intangibles
13,661
315,886
—
Non
-
deductible goodwill associated with the sale of Match
Europe
—
9,175
—
Reversal of deferred tax liability associated with investment in
Ticketmaster
—
—
(
48,695
)
Establishment of valuation allowance on deferred tax assets
distributed to Tree.com
—
—
23,685
Non
-
deductible expenses related to the Spin
-
Off
—
—
8,727
Other, net
1,463
3,200
(2,844
)
Income tax provision (benefit)
$
32,079
$
9,474
$
(30,695
)