XM Radio 2008 Annual Report Download - page 90

The tax effects of temporary differences that give rise to significant portions of the deferred tax assets and
deferred tax liabilities are presented below:
2008 2007
December 31,
Deferred tax assets:
Net operating loss carryforwards ........................... $2,608,038 $ 1,367,744
GM payments and liabilities............................... 506,106 —
Deferred revenue ....................................... 240,849 18,717
Severance accrual ...................................... 17,237 —
Accrued bonus......................................... 24,537 5,753
Expensed costs capitalized for tax .......................... 75,998 —
Loan financing costs .................................... 27,890 —
Investments ........................................... 63,786 —
Stock based compensation ................................ 138,840 126,679
Other ............................................... 100,205 64,637
Total deferred tax assets ................................ 3,803,486 1,583,530
Deferred tax liabilities:
Depreciation of property and equipment ...................... (158,012) (157,438)
FCC license........................................... (766,935) (12,771)
Other Intangible assets ................................... (265,138) —
Net deferred tax liabilities .............................. (1,190,085) (170,209)
Net deferred tax assets before valuation allowance ................ 2,613,401 1,413,321
Valuation allowance....................................... (3,476,583) (1,426,092)
Net deferred tax liability ............................... $ (863,182) $ (12,771)
The difference in the net deferred tax liability of $863,182 and $12,771 at December 31, 2008 and 2007,
respectively, is primarily a result of the deferred tax liability recorded as part of the purchase price accounting for
the value assigned to the FCC license and other intangible assets with indeterminable lives. The other variance is the
result of the difference in accounting for our FCC licenses, which are amortized over 15 years for tax purposes but
not amortized for book purposes. This net deferred tax liability cannot be offset against our deferred tax assets under
U.S. generally accepted accounting principles since it relates to indefinite-lived assets and are not anticipated to
reverse in the same period.
At December 31, 2008, we had net operating loss (“NOL”) carryforwards of approximately $6,800,000 for
federal and state income tax purposes available to offset future taxable income. These NOL carryforwards expire on
various dates beginning in 2023. We have had several ownership changes under Section 382 of the Internal Revenue
Code, which limit our ability to utilize tax deductions.
As a result of the Merger, both SIRIUS and XM had a Section 382 ownership change. The ownership change
does not limit our ability to utilize future tax deductions and so no adjustments were made to gross deferred tax
assets as a result of the Merger.
Furthermore, future changes in our ownership may limit our ability to utilize our deferred tax assets.
Realization of our deferred tax assets is dependent upon future earnings; accordingly, a full valuation allowance
was recorded against the assets.
F-40
SIRIUS XM RADIO INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)