America Online 2010 Annual Report Download - page 96

Table of Contents
AOL INC.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
The components of the provision for income tax expense (benefit) provided on income from continuing operations were as follows (in millions):
Years Ended December 31,
2010 2009 2008
(recast) (recast)
U.S. federal:
Current $ 2.0 $ 172.3 $ 309.7
Deferred (167.7) (1.5) (35.1)
Foreign:
Current (6.2) 1.1 12.6
Deferred (3.2) (0.8) (2.2)
State and local:
Current 9.6 40.0 81.7
Deferred (13.0) (2.4) (13.7)
Total $ (178.5) $ 208.7 $ 353.0
The items accounting for the difference between income tax expense (benefit) computed at the federal statutory rate of 35% and the provision for
income taxes were as follows:
Years Ended December 31,
2010 2009 2008
(recast) (recast)
U.S. federal statutory rate 35.0% 35.0% 35.0%
State and local taxes, net of U.S. federal tax benefits 3.7 3.6 (3.6)
Non-deductible goodwill (50.8) — (59.6)
Change in valuation allowance for deferred tax assets (1.4) 1.9 (0.4)
Unrecognized tax (liabilities) benefits 0.5 3.8 (2.2)
Worthless stock deduction 31.0 — —
Other 0.4 1.1 0.6
Total 18.4% 45.4% (30.2)%
Income taxes related to the year ended December 31, 2010 and the short period from December 10, 2009 through December 31, 2009 are calculated
based on AOL's separate income tax status. For the periods prior to the spin-off, AOL's income taxes are computed and reported under the "separate return
method." The separate return method applies the accounting guidance for income taxes to the financial statements as if AOL were a separate taxpayer and a
standalone enterprise for the entire period. Prior to the spin-off, AOL was included in Time Warner's consolidated U.S. federal income tax return filings.
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