Southwest Airlines 2011 Annual Report Download - page 121
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The provision for income taxes is composed of the following:
(in millions) 2011 2010 2009
CURRENT:
Federal .................................................... $ 4 $198 $(24)
State ...................................................... 13 19 (1)
Total current ............................................ 17 217 (25)
DEFERRED:
Federal .................................................... 122 61 79
State ...................................................... 6 8 11
Total deferred ........................................... 128 69 90
$145 $286 $ 65
The effective tax rate on income before income taxes differed from the federal income tax statutory rate for
the following reasons:
(in millions) 2011 2010 2009
Tax at statutory
U.S. tax rates ............................................... $114 $261 $ 58
Nondeductible items ............................................. 13 8 5
State income taxes, net of federal benefit ............................. 13 18 6
Other, net ...................................................... 5 (1) (4)
Total income tax provision .................................... $145 $286 $ 65
During 2011, as a result of the AirTran acquisition, the Company recorded a liability for unrecognized tax
benefits of approximately $5 million, the majority of which related to AirTran’s prior years’ tax positions. If
recognized, the unrecognized tax benefits at December 31, 2011, would prospectively impact the Company’s
effective tax rate. The December 31, 2010 unrecognized tax benefits of $4 million were settled with the IRS
during the year ended December 31, 2011.
For the year ended December 31, 2011, the Company had net operating loss (“NOL”) carryforwards of
approximately $548 million from its federal tax return. These NOL’s are available to offset future taxable
income. At a 35% federal statutory tax rate, these NOL’s result in a deferred tax asset of $192 million, which
represents the expected future tax benefit of the NOL’s. These NOL’s will expire from 2017 to 2031 if not
utilized. No valuation allowance was necessary. See Note 2 for further information on NOL’s acquired from
AirTran. The only periods subject to examination for the Company’s federal tax return are the 2010 to 2012 tax
years.
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