iHeartMedia 2005 Annual Report Download - page 81

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The reconciliation of income tax computed at the U.S. federal statutory tax rates to income tax expense (benefit) is:
(In thousands) 2005 2004 2003
Amount Percent Amount Percent Amount Percent
Income tax expense (benefit) at
statutory rates $ 377,765 35% $ 456,315 35% $ 634,103 35%
State income taxes, net of federal tax
benefit 18,191 2% 34,032 3% 67,699 4%
Foreign taxes 6,624 1% 11,379 1% 5,513 0%
Nondeductible items 2,337 0% 5,173 0% 7,023 0%
Changes in valuation allowance and
other estimates 19,673 2% (3,890) (1%) 61,201 4%
Other, net 1,746 0% (3,645) 0% 1,382 0%
$ 426,336 40% $ 499,364 38% $ 776,921 43%
During 2005, the Company utilized approximately $3.7 million of net operating loss carryforwards, the majority of
which were generated by certain acquired companies prior to their acquisition by the Company. The utilization of
the net operating loss carryforwards reduced current taxes payable and current tax expense as of and for the year
ended December 31, 2005. As stated above the Company recognized a capital loss of approximately $2.4 billion
during 2005. Approximately $890.7 million of the capital loss will be utilized in 2005 and carried back to earlier
years resulting in a $314.1 million current tax benefit that was recorded as a component of discontinued operations.
The Company has approximately $1.5 billion in capital loss carryforwards, which are recorded as a deferred tax
asset on the Company’s balance sheet at its effective tax rate, for which a 100% valuation allowance has been
recorded. If the Company is able to utilize the capital loss carryforward in future years, the valuation allowance will
be released and be recorded as a current tax benefit in the year the losses are utilized.
In addition, during 2005, current tax expense was reduced by approximately $210.5 million from foreign exchange
losses as a result of the Company’s restructuring its international businesses consistent with the strategic
realignment, a foreign exchange loss for tax purposes on the redemption of the Company’s Euro denominated bonds
and tax deductions taken on an amended tax return filing for a previous year. The Company’s deferred tax expense
increased as a result of these items.
During 2004, the Company utilized approximately $5.7 million of net operating loss carryforwards, the majority of
which were generated by certain acquired companies prior to their acquisition by the Company. The utilization of
the net operating loss carryforwards reduced current taxes payable and current tax expense as of and for the year
ended December 31, 2004. As a result of the favorable resolution of certain tax contingencies, current tax expense
includes benefits of $34.1 million. The benefits resulted in an effective tax rate of 38% for the twelve months ended
December 31, 2004.
During 2003, the Company utilized approximately $31.4 million of net operating loss carryforwards, the majority of
which were generated by certain acquired companies prior to their acquisition by the Company. The utilization of
the net operating loss carryforwards reduced current taxes payable and current tax expense as of and for the year
ended December 31, 2003.
The remaining federal net operating loss carryforwards of $12.4 million expire in various amounts from 2006 to
2021.