Southwest Airlines 2007 Annual Report Download - page 76

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15. Income Taxes
Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for income tax purposes. The components of deferred tax
assets and liabilities at December 31, 2007 and 2006, are as follows:
2007 2006
(In millions)
DEFERRED TAX LIABILITIES:
Accelerated depreciation .......................................... $2,612 $2,405
Fuel hedges ................................................... 884 363
Other ....................................................... 19 1
Total deferred tax liabilities .................................... 3,515 2,769
DEFERRED TAX ASSETS:
Deferred gains from sale and leaseback of aircraft ........................ 65 70
Capital and operating leases ....................................... 58 65
Accrued employee benefits ........................................ 187 160
Stock-based compensation ......................................... 110 122
State taxes .................................................... 75 55
Business partner income .......................................... 78 37
Net operating loss carry forward .................................... —22
Other ....................................................... 37 56
Total deferred tax assets ........................................ 610 587
Net deferred tax liability ........................................ $2,905 $2,182
The provision for income taxes is composed of the following:
2007 2006 2005
(In millions)
CURRENT:
Federal .................................................. $108 $64 $43
State .................................................... 915 7
Total current ............................................ 117 79 50
DEFERRED:
Federal .................................................. 246 220 231
State .................................................... 50 (8) 14
Total deferred ............................................ 296 212 245
$413 $291 $295
For the year 2004, Southwest had a tax net oper-
ating loss of $616 million for federal income tax purposes.
The Company carried a portion of this net operating loss
back to prior periods, resulting in a $35 million refund of
federal taxes previously paid. This refund was received
during 2005. The Company applied a portion of this
2004 net operating loss to the 2005 and 2006 tax years,
resulting in the payment of no regular federal income
taxes for these years. The remaining portion of the
Company’s federal net operating loss was utilized during
2007.
57
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)