XM Radio 2013 Annual Report Download - page 128

COMBINED NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
(Dollar amounts in thousands, unless otherwise stated)
historical financial performance, scheduled reversal of deferred tax assets and liabilities, projected taxable
income and tax planning strategies in making this assessment. The weight given to the potential effects of
positive and negative evidence is based on the extent to which it can be objectively verified. The net deferred tax
assets are primarily related to gross net operating loss carryforwards of approximately $5,828,461. In addition to
the gross book net operating loss carryforwards, we have $702,187 of excess share-based compensation
deductions that will not be realized until we utilize the $5,828,461 of net operating losses, resulting in an
approximate gross operating loss carryforward on our tax return of $6,530,648.
For the year ended December 31, 2012, our deferred tax asset valuation allowance decreased by $3,350,905
in response to cumulative positive evidence in 2012 which outweighed the historical negative evidence from our
emergence from cumulative losses in recent years and updated assessments regarding that it was more likely than
not that our deferred tax assets will be realized. As of December 31, 2013, the deferred tax asset valuation
allowance of $7,831 relates to deferred tax assets that are not likely to be realized due to certain state net
operating loss limitations and acquired net operating losses that we are not more likely than not going to utilize.
These net operating loss carryforwards expire on various dates beginning in 2017 and ending in 2028.
As a result of the acquisition of the connected vehicle business of Agero, we established net current deferred
tax assets of $767 and net non-current deferred tax liabilities of $78,127. The net non-current deferred tax
liabilities are primarily due to intangible assets and the acquired separate return limitation year net operating
losses of $4,340; of which $2,224 remain fully valued.
As of December 31, 2013 and 2012, the gross liability for income taxes associated with uncertain state tax
positions was $1,432. If recognized, $1,432 of unrecognized tax benefits would affect the effective tax rate. This
liability is recorded in Other long-term liabilities. No penalties have been accrued for. We do not currently
anticipate that our existing reserves related to uncertain tax positions as of December 31, 2013 will significantly
increase or decrease during the twelve-month period ending December 31, 2014; however, various events could
cause our current expectations to change in the future. Should our position with respect to the majority of these
uncertain tax positions be upheld, the effect would be recorded in our consolidated statements of comprehensive
income as part of the income tax provision. Our policy is to recognize interest and penalties accrued on uncertain
tax positions as part of income tax expense. We have recorded interest expense of $40 and $55 for the years
ended December 31, 2013 and 2012, respectively, related to our unrecognized tax benefits presented below.
Changes in our uncertain income tax positions, from January 1 through December 31 are presented below:
2013 2012
Balance, beginning of year ............................................ $1,432 $1,432
Additions for tax positions from prior years ............................... — —
Balance, end of year ............................................... $1,432 $1,432
We have federal and certain state income tax audits pending. We do not expect the ultimate disposition of
these audits to have a material adverse affect on our financial position or results of operations.
The increased ownership in us by Liberty Media to over 50% of our outstanding common stock did not
create a change of control under Section 382 of the Internal Revenue Code.
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