United Healthcare 2010 Annual Report Download - page 86

The components of deferred income tax assets and liabilities as of December 31 are as follows:
(in millions) 2010 2009
Deferred income tax assets:
Share-based compensation ................................................. $ 385 $ 419
Net operating loss carryforwards ............................................ 285 206
Accrued expenses and allowances ........................................... 233 201
Long term liabilities ...................................................... 147 164
Medical costs payable and other policy liabilities ............................... 102 218
Unearned revenues ....................................................... 78 58
Unrecognized tax benefits ................................................. 62 55
Other .................................................................. 215 190
Subtotal .................................................................... 1,507 1,511
Less: valuation allowances ..................................................... (247) (198)
Total deferred income tax assets ................................................ $1,260 $ 1,313
Deferred income tax liabilities:
Intangible assets ......................................................... $(1,104) $ (890)
Capitalized software development ........................................... (450) (449)
Net unrealized gains on investments ......................................... (161) (163)
Depreciation and amortization .............................................. (140) (80)
Prepaid expenses ......................................................... (92) (90)
Total deferred income tax liabilities .............................................. (1,947) (1,672)
Net deferred income tax liabilities ............................................... $ (687) $ (359)
Valuation allowances are provided when it is considered more likely than not that deferred tax assets will not be
realized. The valuation allowances primarily relate to future tax benefits on certain federal and state net operating
loss carryforwards. Federal net operating loss carryforwards of $149 million expire beginning in 2011 through
2030, and state net operating loss carryforwards expire beginning in 2011 through 2029.
A reconciliation of the beginning and ending amount of unrecognized tax benefits as of December 31 is as
follows:
(in millions) 2010 2009
Gross unrecognized tax benefits, beginning of period .................................... $220 $340
Gross increases:
Current year tax positions ...................................................... 13 10
Prior year tax positions ........................................................ 30 11
Gross decreases:
Prior year tax positions ........................................................ 0 (62)
Settlements ................................................................. 0 (61)
Statute of limitations lapses .................................................... (43) (18)
Gross unrecognized tax benefits, end of period ......................................... $220 $220
The Company classifies interest and penalties associated with uncertain income tax positions as income taxes
within its Consolidated Financial Statements. During the year ended December 31, 2010, the Company
recognized $15 million of interest expense and penalties. During the year ended December 31, 2009, the
Company recognized a net tax benefit of $7 million generated from the reduction in interest accrued from the
release of previously accrued tax matters. As of December 31, 2010, the Company had $63 million of accrued
interest and penalties for uncertain tax positions and, as of December 31, 2009, the Company had $44 million of
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