eTrade 2011 Annual Report Download - page 149

The following table summarizes the tax years that are either currently under examination or remain open
under the statute of limitations and subject to examination by the major tax jurisdictions in which the Company
operates:
Jurisdiction Open Tax Years
Hong Kong 2001-2011
United Kingdom 2008-2011
United States 2004-2011
Various states(1) 2002-2011
(1) Includes California, Georgia, Illinois, New Jersey, New York and Virginia.
It is likely that certain examinations may be settled or the statute of limitations could expire with regards to
other tax filings, in the next twelve months. In addition, proposed legislation could favorably impact certain of
the Company’s unrecognized tax benefits. Such events would generally reduce the Company’s unrecognized tax
benefits, either because the tax positions are sustained or because the Company agrees to the disallowance, by as
much as $10.2 million, all of which could impact the Company’s total tax provision or the effective tax rate.
The Company’s practice is to recognize interest and penalties, if any, related to income tax matters in
income tax expense. The Company has total reserves for interest and penalties of $11.6 million and $9.9 million
as of December 31, 2011 and 2010, respectively. The tax expense for the year ended December 31, 2011 includes
an increase in the accrual for interest and penalties of $1.7 million, principally related to state taxes.
Deferred Taxes and Valuation Allowance
Deferred income taxes are recorded when revenues and expenses are recognized in different periods for
financial statement and tax return purposes. Prior year balances for the deferred tax assets and liabilities have
been re-presented to ensure consistency between periods. The adjustments relate to the presentation of the basis
differences in investments and mark to market for certain loans and securities. The temporary differences and tax
carry forwards that created deferred tax assets and deferred tax liabilities are as follows (dollars in thousands):
December 31,
2011 2010
Deferred tax assets:
Reserves and allowances, net $1,216,487 $1,180,768
Net operating losses 567,774 588,178
Basis differences in investments 67,738 13,830
Capitalized interest 65,767 59,075
Deferred compensation 44,512 45,472
Tax credits 16,169 6,383
Restructuring reserve and related write-downs 15,092 15,523
Other 27,109 12,762
Total deferred tax assets 2,020,648 1,921,991
Valuation allowance (73,533) (75,959)
Total deferred tax assets, net of valuation
allowance 1,947,115 1,846,032
Deferred tax liabilities:
Depreciation and amortization (260,600) (184,616)
Mark to market (107,811) (187,822)
Total deferred tax liabilities (368,411) (372,438)
Net deferred tax asset $1,578,704 $1,473,594
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